Independent and restricted financial advice

The Financial Conduct Authority (FCA) categorises financial  advisers as either “Independent” or “Restricted”.

The former have to prove their independence by ensuring that when they recommend a product solution to a client they have considered all suitable alternatives and selected the recommended solution from the whole of the market.

If the adviser cannot prove they have done this then by definition they are “restricted”

Leaving aside the fact that the word “restricted” has a pejorative tone to it, it is not meant to imply any negativity in the sense that the adviser might still be offering a good choice of product solutions to his client.

The FCA wanted to set the bar higher in terms of the use of the title “Independent” but in reality it hasn’t changed much in the IFA world.

It is still perfectly possible that a whole range of investment product solutions can be dismissed pretty quickly as unsuitable for our client (for example VCTs, EISs, Structured products even Investment Trusts for a whole host of reasons might be unsuitable for a client).

In our view though independent means so much more than an independent selection of financial product. To us that is just too narrow a focus.

Ownership

We believe that an important part of our definition of independence is the fact that we are independently owned.

There is no “big brother” firm behind us forcing us at any level to use a particular product or range of products to satisfy our client needs and wants.

Certainly there is no hidden financial agenda driving our selection.

Independence of ownership is to us an integral part of our independent financial adviser status.

Client

No independent firm would seek to be “all things to all men”.

Part of our independence is reflected in the fact that we don’t have to do everything, particularly things that we are not competent or efficient to do.

Rarely these days is a client looking for a general practitioner. Instead they are seeking specialist advice from suitably qualified and experienced advisers.

Thought

Our thought process is independent.

Each of our clients is different to the next. Whilst they may have some attributes that are similar each may have different needs and wants.

We start from a position of not prejudging what might be best for them.

Of course we use all of our experience qualifications and skills to formulate best advice to our clients but the starting point is independence of thought.

This by the way is not just at firm level but every individual within the firm exercise independent thought.

Process

Our delivery of advice is not contingent upon a client having to buy a financial product.

We deliver independent, impartial advice, for which we charge an explicit fee (because it is valuable).

If the right thing to do is to buy an investment product and that is by no means a predetermined outcome of our advice, the client is perfectly at liberty to buy that product from any source they choose.

Of course if they want us to act as their “broker” we are happy to do so but they do have independent choice, do nothing, buy through another adviser, buy online.

Product

Over the years financial products have tended to become quite homogenous this is particularly true following the introduction of “wrap” platforms.

The wrap trend has seen a significant reduction of initial charges. In our world it is now incredibly rare for our client to pay any initial fees to fund management groups.

But wrap platforms allow us access to not just the whole of market for collective investment funds but for those clients who require it individual stocks and shares

Bringing it altogether

How we behave towards our clients is a much better definition of our independence than the rather narrow regulatory view of the world.

Put succinctly, we are independent because there is no one out there telling us we have to do things in a prescribed way.

We wouldn’t like that and neither would our clients.

The Financial Conduct Authority categorises financial  advisers as either “Independent” or “Restricted”. The former have to prove their independence by ensuring that when they recommend a product solution to a client they have considered all suitable alternatives and selected the recommended solution from the whole of the market. If the adviser cannot prove they have done this then by definition they are “restricted”

Leaving aside the fact that the word “restricted” has a pejorative tone to it, it is not meant to imply any negativity in the sense that the adviser might still be offering a good choice of product solutions to his client. The FCA wanted to set the bar higher in terms of the use of the title “Independent” but in reality it hasn’t changed much in the IFA world. It is still perfectly possible that a whole range of investment product solutions can be dismissed pretty quickly as unsuitable for our client. (for example VCTs, EISs, Structured products even Investment Trusts for a whole host of reasons might be unsuitable for a client)

In our view though independent means so much more than an independent selection of financial product. To us that is just too narrow a focus.

Ownership

We believe that an important part of our definition of independence is the fact that we are independently owned. There is no “big brother” firm behind us forcing us at any level to use a particular product or range of products to satisfy our client needs and wants. Certainly there is no hidden financial agenda driving our selection. Independence of ownership is to us an integral part of our independent financial adviser status;

Client

No independent firm would seek to be “all things to all men” Part of our independence is reflected in the fact that we don’t have to do everything, particularly things that we are not competent or efficient to do. Rarely these days is a client looking for a general practitioner. Instead they are seeking specialist advice from suitably qualified and experienced advisers.

Thought

Our thought process is independent. Each of our clients is different to the next. Whilst they may have some attributes that are similar each may have different needs and wants. We start from a position of not prejudging what might be best for them. Of course we use all of our experience qualifications and skills to formulate best advice to our clients but the starting point is independence of thought. This by the way is not just at firm level but every individual within the firm exercise independent thought.

Process

Our delivery of advice is not contingent upon a client having to buy a financial product. We deliver independent, impartial advice, for which we charge an explicit fee (because it is valuable). If the right thing to do is to buy an investment product and that is by no means a predetermined outcome of our advice, the client is perfectly at liberty to buy that product from any source they choose. Of course if they want us to act as their “broker” we are happy to do so but they do have independent choice, do nothing, buy through another adviser, buy on-line.

Product

Over the years financial products have tended to become quite homogenous this is particularly true following the introduction of “wrap” platforms. The wrap trend has seen a significant reduction of initial charges. In our world it is now incredibly rare for our client to pay any initial fees to fund management groups. But wrap platforms allow us access to not just the whole of market for collective investment funds but for those clients who require it individual stocks and shares

Bringing it altogether

How we behave towards our clients is a much better definition of our independence than the rather narrow regulatory view of the world. Put succincly we are independent because there is no one out there telling us we have to do things in a prescribed way. We wouldn’t like that and neither would our clients.