Retail investment products and independence

Exchange Traded Funds (ETFs) are becoming an increasingly popular way for investors to access various investment markets.

New research from Defaqto suggests that ETFs will become even more popular following the end of this year, as independent financial advisers must consider these investments if they wish to remain independent.

ETFs are on the list of ‘retail investment products’ that independent financial advisers must consider in terms of suitability for their clients.

The new definition of retail investment product is wider than the current definition of packaged products that independent financial advisers must consider. It also includes structured capital-at-risk products and a fairly catch-all definition of ‘designated investments which offer exposure to underlying financial assets’.

It’s worth noting that independent financial advisers will not have to review products that are not available to or targeted at UK consumers.

The Financial Services Authority (FSA) also expect certain types of niche investment funds, known as Unregulated Collective Investment Schemes (UCIS) to be suitable for very few clients. Independent status will not be affected by a decision not to consider an investment in a Mexican golf course development!

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