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Enforcement of the broadened definition of independent adviser status laid out in the RDR is likely to be "very difficult", says Tenet's distribution and development director Keith Richards.
Meanwhile, Resources Compliance UK managing director Simon Collins says "best endeavours" at a fair analysis of the market is all advisers can do when faced with the "challenge" of remaining independent post-2012.
Their comments were part of a Personal Finance Society live debate on Labelling and Disclosure yesterday.
Answering questions from advisers wanting to clarify the difference between the new and existing definitions, Richards says: "Independent in the future will be more demanding. It has to encompass a broader range of investment advice than is currently evident in the market."
But he raised scepticism about how this would be policed in practice following the widening out of the idea of packaged products to include structured products, investment trusts, and ETFs among others.
"It is very difficult to see how you will manage enforcement of this."
Increased consumer clarity on issues such as independence is fundamental to the FSA's program of industry changes.
"If it doesn't work we have spent an awful long time, money and effort on not getting any further," said Collins.
With consumer trust in the industry so low, the industry can not afford to confuse the people it is trying to deal with he said.
The specialist route is likely to develop in the future, according to the pair, "because it is going to be impossible for everyone to be an expert on everything".
Multi-tied advice will stick around in the very specialist area but it is "difficult to see why advisers would choose multi-tie over independent" post 2012, says Richards.
Neither expects a significant switch of IFAs to a restricted model unless the differentiator between independent and restricted becomes much greater.
A recorded version of yesterday's debate is available to watch at the PFS site
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Independent label
Mr Richards is over-optimistic if he thinks the FSA will '..find it difficult to enforce the proposed independent label'. Enforcement has never been a problem for the FSA. They will just compose a definition, then apply it retrospectively,as in the "endowment mis-selling" pogroms. With the volume of complaints agaist IFAs dropping sharply, they can't keep up their salaries unless there is a new set of inscrutable rules to enforce.
Posted by: James Redman
INDEPENDENT ADVICE WILL BE AT AN END
Can you really advise on the whole market? It proliferates your liability and you will need to earn more than the restricted adviser to cover your open book liabilities. If you broaden the scope independent advice you lessen the possibility that the adviser in return covers all areas asked of him/her. This will expose the adviser to a consumerist field day of complaints facilitated by a regulator looking to keep itself in business with much depleted numbers to regulate.
Posted by: SIMON MANSELL
Independent
Due to an oversight in the FS & M Act 2000, the use of the term IFA by non FSA regulated firms was not proscribed by law. Due to an oversight in the Solicitor's Act 1975, anyone unqualified person can legally hold himself out to be a solicitor. Of course chartered accountants have long been campaigning to get use of the term 'accountant' proscribed for non-qualifieds by law. Come on guys, everyone, quite legally is going to call themselves 'independent' simply because they can, quite legally. Why would anyone do otherwise? I sure as hell intend to. If you want to stop me, then pass a law!
Posted by: Pete Morris
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More nonsense.
The biggest farce of all is that IFAs cannot access ETF and ETC directly but have to go through third parties. The FSA ought first to make it possible for IFAs to access these directly. Then of course there is the matter of structured products. Firstly many IFAs have had enough of these following Key Data - they can no longer be considered low risk. Furthermore in view of the FSA’s new rulings on these isn’t it a bit bizarre that when I followed up a latest offering (from the big red Question mark) and asked who the counterparties were I was told that they would not divulge this as it was confidential. Yet again I fear the Canaries have moved before brain was engaged. Defining independence isn’t rocket science. You work on behalf of the client, you are not paid by a third party and you access the whole market – as it now exists, which you can access directly (without a middleman) and for which you have permission. If a middleman is used (a platform) it needs to be shown that there is a demonstrable advantage for the client in doing so. It is not a matter of HAVING to use a middleman to access the product – only of using one if it makes sense. What’s so hard about that?
Posted by: Harry Katz