IFA says term 'independent' has lost meaning

Independence remains “a good term”, an IFA says, but ongoing debate about what defines an ‘independent’ practitioner could render it meaningless.

Alan Lakey, a protection and mortgages specialist at Hertfordshire-based Highclere Financial Services, says the term ‘independent' has been steadily "losing kudos" since de-polarisation in 2003.

Current RDR proposals, he adds, mean there could be instances where advisers who are, by definition, whole of market could be forced to drop the independent tag. But he asks: "Would that be such a bad thing?"

In June's RDR Feedback Statement, the FSA outlined the requirements for independent advisers. It said they must provide a "fair and comprehensive analysis" of the market as well as written disclosure of their independent status.

Additionally, they must implement adviser charging and be qualified to at least QCF level four.

In this week's RDR consultation paper, the FSA proposed a read-across of investment adviser labeling into the protection market to create "consistency" across distribution channels.

However, for protection, the labels will relate to the range of advice offered rather than being based on whether an adviser is ‘whole of market'.

"It might not be such a bad thing to drop the independent label," Lakey says. "If I was told I couldn't use it, I don't think I would care all that much. What is important is that I am whole of market.

"Independence is a good term but I think we are losing the plot. There has been such a torrent of arguments as to what independent actually means.

"Is it somebody who is fee-only? Somebody who only operates from the whole of market? Because of the way it is being argued, it seems to me it could be a possibility certain advisers who are whole of market won't be able to use the word ‘independent'.

Lakey adds use of panels and ‘best of breed' solutions by some IFAs further muddies the water over what defines an independent adviser.

It follows a warning by the Institute of Financial Planning (IFP) in October, which argued terms including ‘best of breed' and ‘whole of market', such as in fund choice through a single provider bond wrapper, should be outlawed for ‘restricted' practitioners.

"There are retail investment advisers out there who do not work from the whole of market," Lakey says. "They have selected a panel they believe to be ‘best of breed', but, in a sense, they are no longer independent. They have lost that independence."