Quite a lot, says IFA Centre’s Gillian Cardy. And a good thing too..
How times change. 25 years ago, we got to grips with the new concept of tied advisers disclosing that they only sold products from their own company. For those people, at that time, you couldn’t comment on products from another provider even if you knew about them. And if it was not “best advice” to sell them something from your own product range, clients were told to go and find an independent adviser instead.
There was no regulatory definition of an independent adviser in those days, of course, but the “i” word was still valuable enough for direct sales people to use – usually in the context of running their own “independent” businesses.
“Multi-ties” introduced a creative way to enable firms to advise on products from a limited range of providers, accepting that the best term assurance provider might not be the best personal pension provider (although whether they were indeed “best of breed” or merely commercial arrangements was never clear).
Later still, you could only describe yourself as an independent adviser if you offered clients a fee option to pay for their advice, while whole-of-market advisers continued working on commission only.
A Binary Choice
But here we are now with RDR around the corner, and it looks like the whole current miasma of tied, multi-tied, whole of market or independent will finally be replaced with a simple binary choice : Restricted or Independent.
The return to this simple distinction is reassuring. Either you’ll have ties, special deals, reduced ranges, favourable terms, contractual arrangements, limited research, or panels which prevent you advising clients on the full range of products and providers. Or you won’t.
Now, some people (not entirely without vested interests) suggest that Independence is no longer important to advisers or their clients. But review the websites of a number of advisory firms, and it’s stunning quite how many column inches firms devote to describing Independent Financial Advice and explaining why it’s important. I quote :
- “Independence is the only way you, the client, can get a truly objective view of your finances.”
- “It’s ‘altogether individual’. We create strategies tailored to client needs, using every possibility available. Independent in thought, in action, and independent of any product provider.”
- “Because all our advisers are independent … their advice is truly impartial.”
- “One size doesn’t fit all. Clients are individuals.”
- “The firm’s only allegiance is to the client, not to any product provider.”
- “IFAs only ever work in the client’s best interest.”
When you put it that way, why on earth would a client aspire to anything else? Well, the converse works as well. Let’s try turning all those grand statements round, inserting a few negatives, and then decide what would make those propositions appealing to clients?
Create a Restricted offering [in this way], and you have effectively decided that your clients, some of whom will face dramatic changes in their lives and finances, and some of whom you haven’t met yet, will never need advice on certain products or arrangements from certain providers. Quite simply, the client did not set the advice agenda. You did.
It’s simple to explain how Restricted advice is in the firm’s best interest (easier, cheaper, quicker, more profitable). But how can it be in a client’s best interest for advisers to have decided what solutions they will need, months or years before they walk through the door?
Independent advisers aren’t irrational or emotional, unsustainable or dinosaurs.
They have decided it cannot be in a client’s best interest to provide less tailored, less bespoke, less individual, less impartial, less objective, not Independent, Restricted advice. And, quite simply, their clients come first.
Gillian Cardy is the managing director of IFA Centre
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