Independence bar is not set too high, says FSA
Share
The bar has not been set too high for independent financial advice, claims Peter Smith, head of investment policy at the Financial Services Authority (FSA).
The regulator published a series of retail distribution review (RDR) papers this week on independent and restricted advice, distributor-influenced funds and the treatment of legacy assets.
They reiterate that a firm claiming to offer independent advice must provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market.
Independent advisers must consider a broad range of retail investment products, including structured products and unregulated collective investment schemes.
Asked by Money Marketing, Fundweb’s sister publication, if the bar for independence has been set too high, Smith said: “I do not think the bar is that high. There is a lot of pragmatism built into the requirements.” (article continues below)
Smith argues the independence requirements after the RDR are there to ensure advisers think about how best to service current and future clients.
Asked how many advisers are likely to stay independent after the RDR, Smith says: “For a large proportion of advisers, they see benefit in the term independent adviser, so they are starting down the route of wanting to be independent. Inevitably, there will be some firms for one reason or another that decide they wish to offer a restricted advice service. We do not know the exact numbers of that yet, that will become clearer as this year goes on.”
Simon Webster, managing director of Facts & Figures Financial Planners, says: “The bar for independence has not moved much. An IFA, by definition, is supposed to offer independent, whole of market advice.”
To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here and Follow @fundweb
Readers' comments (3)
Glen McKeown | 2 Mar 2012 3:36 pm
This statement by Peter Smith provokes two distinct thoughts.
The first is - Has the FSA ever admitting to rethinking any strategy it has proposed? I'm not certain of any other institution that comes closer to thinking itself infallible. I believe that the FSA are now so embedded in Group Think mode, with the perception that the whole world is against them (which could be true) that they cannot under any circumstances take any step backwards since it may give the impression of weakness. That it could give the illusion of listening is not even in their mind set.
Secondly, does the statement actually make any sense? Independence is about breadth (of operation) not height, so there is an indication that even the FSA are struggling to understand what they require. I have called them lazy thinkers before, and this is a perfect example.
Look at the mixed metaphor. Independence is contrasted with restricted advice. Think about the absurdity of that statement. If you limit your advice you are not independent. Not independent of what? They may define things that way, but is makes absolutely no intellectual sense. So just how are the public to react to the definitions? Probably in much the same way as they do now - apparently they have no idea about the various differences and don't give a monkeys.
But then again neither do the FSA or the FOS. All complaints against advisers are logged as complaints against IFAs. One of the organisations that has sufficient complaints to warrant naming is SJP, a tied agent. Yet the statistics make no reference to tied agents.
With every utterance from Canary Wharf one has to ask whether there are of this world.
Unsuitable or offensive? Report this comment
Anonymous | 3 Mar 2012 12:47 pm
what a pity that the FSA doesn't put as much effort into regulating the banks as they do into trying to kill our industry, but then they wouldn't would they ?
Unsuitable or offensive? Report this comment
Stan Kirk | 4 Mar 2012 7:39 pm
Is there any evidence that the FSA has done any research to show what the client expects and wants from an 'independent' adviser? All the evidence points to the contrary, that clients put the highest value on personal financial planning advice and very little on the selection of 'product' provider. Indeed, in the IFA market, what is the 'Product'? The IFA would like it to be the advice - carefully crafted to achieve specific objectives. Maybe it's a series of products, the various funds in a portfolio? The FSA says it is the administrator of the tax wrapper provider , except an ISA where legislation specifically specifies the investment fund(s) is the product! It is that word 'legislation' which is the problem. The FSA works to a definition of 'independence' set in the last century when the retail financial landscape consisted almost entirely of 'bundled pricing' financial products which covered the tax wrapper, the investments and the adviser remuneration all in one package. The world has moved on. Advisers and clients have embraced 'unbundled' pricing which greatly enhances independence and choice but the FSA is stuck in a place where it is not allowed to acknowledge that change. In the process it is in great danger of limiting 'independent' advice to a service which nobody actually wants or can afford. The one thing which is definitely 'restricted' is the FSA definition of 'independent'.
Unsuitable or offensive? Report this comment