Independent or Restricted Financial Advice?

At the heart of the financial planning market lies the Independent Financial Adviser.


The easiest way to describe an Independent Adviser is to state that they are unrestricted in how they can advise you and any adviser that is not independent will be restricted to some degree or extent.

The Independent Adviser will provide independent advice and is able to consider and recommend all types of retail investment products that could meet your needs and objectives. A restricted adviser or firm can only recommend certain products, product providers, or both.


The distinction as set out by the regulations is one thing, but how does this translate into the day to day work and the overall service/advice that you can expect?


Here are a few examples:


Appropriate Solutions: Products, Companies, Funds


Whatever your current position you will need to use financial ‘products’ to help you along your financial pathway. These could include pensions, tax wrappers such as ISAs, savings accounts, life assurance  products and annuities.


The best companies for one person may be very different from the best companies for another. An Independent Adviser will be able to match the right products, companies and funds from across the market to meet the solutions required by each individual client.


A restricted adviser or firm can only recommend certain products, product providers, or both. They will have to fit their client’s requirement into the restricted range of products and solutions they have available.


Asset Allocation


Where investment advice is required the most common method of finding the right mix of investments is via an asset allocation model. This is where the investor’s requirement is aligned to a carefully selected asset split, which will be married to the investor’s risk tolerance.


An Independent Financial Adviser can construct an asset allocation approach without any restrictions. As this is generally considered the most important part of the process then it is crucial for investors to know that they can have the right asset allocation for their circumstances

Clients will be forced into an asset allocation model which is determined by their adviser’s restricted available solutions.


Specialised Areas


There are specialised areas of advice where the distinctions between an independent approach and a restricted approach become more apparent than ever.


Take pensions, for example. When you come to retirement you can convert your pension into income through an annuity, drawdown, ‘third way’ options and more. At this critical point in time, all individuals should have all options available to them. Independent financial advisers can offer this.


Many restricted advisers (ironically including some of the biggest providers of retirement solutions in the UK) do not have all of these options to offer their clients.


Retail Investment Products


The range of Products available for individuals to use in financial planning is largely covered by the list of Retail Investment Products.

To be capable of calling oneself an Independent Financial Adviser all available RIPs must be accessible when the adviser is advising their client.


The adviser can recommend one or some types of products, but not all retail investment products.



The original article was written by Oliver Pughe (8/12/15).

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