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Giving Independent vs. Restricted Financial Advice

VIDEO: Gill Cardy of IFA Centre discusses how the independent vs. restricted decision is playing out in the implementation stage of RDR

Jon Standring 15 April, 2013 | 10:43AM

Jon Standring: Today, we’re going to be talking about the choices financial advisers need to make between being independent financial advisers or being restricted financial advisers. To talk about this, I’m joined today by Gill Cardy, Founder of IFA Centre and a strong advocate of independent financial advice. 

Welcome, Gill. 

Gillian Cardy: Thanks, Jon. 

Standring: So to start off with, the importance of independence versus restricted: you're a keen advocate of independent as stated, why do you think that’s important to the end consumers? 

Cardy: I think it’s fair to say that from a lot of the research that consumers haven’t always understood what sort of advice that they’re getting and I think a lot of consumers who aren’t absorbed in the world of personal finance don’t always understand what the implications are. But when they do understand what restricted advice means—that the costs might be higher, that there might be products that an adviser isn’t considering and solutions that aren’t available—then they do understand why independence is important and that an independent adviser can give them a full range of solutions. 

Standring: So the choice for an adviser, whether they become independent or restricted, is that due to perception of difficulty of retaining their independence and the new regulations? 

Cardy: There was a lot of discussion about how difficult it was going to be, to be independent and one of my starting points was actually it's not that complicated if you’ve been in IFA before the 31st of December, then it's very, very similar now. And let’s not forget that all advisers will still have to do all of those jobs that we have to do—fact find, risk profile, financial plan, consider the options, write suitability letters, do reports, keep compliance records—all of that is still important for everybody. And I think for IFAs who were considering the wholeof the market before, they are going to be doing that in the future as well. 

Standring: And if an adviser is restricted, is that any sort of form of defence or protection versus being an independent? 

Cardy: No, I mean the FSA has made it very clear that the same standards of advice and suitability will apply. So for an adviser who is restricted perhaps to the products of one particular company, the’ considering options’ part of the job might be a little less onerous then it would be having to consider thousands of investment funds, for example. But overall, I think the job, the entirety of what you have to do when you are advising clients and evidencing why you gave them the advice that you did, that’s not easy, but it applies to everybody. 

Standring: And you speak to a lot of advisers about this area, what are the kind of key one or two questions that you get? 

Cardy: Well now we’re in the implementation phase of RDR and people are getting a lot more practical about what it really means in terms of giving advice. The commonest queries really are around implementing particular propositions. So, how they use platforms, whether one platform is sufficient, whether they need to have two and how independence ties up with having a view on active or passive investment philosophies. And again, it’s really just the starting point is the client and the client’s best interest in delivering suitable solutions for them. 

Standring: Okay. Thanks, Gill. 

Cardy: Thank you. 

Standring: For Morningstar, I’m Jon Standring. Thanks for watching. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Jon Standring

Jon Standring  is Adviser Liaison with Morningstar UK.

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