UK advisers keen on independent status under RDR
Almost nine out of ten of the UK’s financial advisers intend to remain independent under the upcoming Retail Distribution Review (RDR), says a survey by research company Defaqto.
But its research shows this may not be the best option. Ahead of the implementation of RDR next year, advisers have to decide on their business model. In particular they have to decide whether they should remain independent or offer restricted advice.
In a recently published paper, Defaqto explores the potential benefits of ‘restricted’ advice and explains why advisers should not assume that independent advice is the best business model to pursue.
Defaqto’s latest survey of platform users, completed in January, found that 87% intend to retain their independent label going into the RDR; and just 7% are planning to adopt a restricted advice approach.
Defaqto says: “Historically, independent financial advisers have placed great value on the independent label, defending fiercely the notion of independent advice. However, from 2013, independent advisers will need to provide unrestricted advice and consider all investments that could meet a client’s needs.
“In reality, advisers who analyse their client bank may find that most, if not all, of their clients would be perfectly well served by restricted advice and that this framework will be easier for many businesses to operate within. As a result, advisers will need to consider whether their declared intention to remain independent is an automatic, emotional one or a practical business decision.”
Fraser Donaldson, Defaqto’s Insight Analyst for Funds, said: “The FSA has made it clear that independent advisers need to consider all retail investment products that are capable of meeting the needs of the client. This is quite a commitment and will mean independent advisers have to invest in research, or outsource this aspect of their business.
“However, an adviser offering restricted advice can limit themselves to the products of a single company, single group of companies or a limited group of companies. This will enable them to focus on the markets – and key providers within them – that will meet their needs and provide the maximum value to their clients.”