SIFA accuses FSA of "total cop-out" on restricted advice oral disclosure

The FSA's u-turn on forcing restricted advisers to disclose their non-independence using a fixed set of words is a "total cop-out" and not in the best interests of customers, says SIFA.

In its June consultation paper the regulator said firms offering restricted advice may be required to provide oral disclosure using a specific form of words, including the name of the firm they work for and the range of products it advises on.

However in today's final Policy Document, ‘Delivering the RDR', the need for restricted advisers to use the FSA's words to disclosing to customers their non-independent status has been dropped, in a move SIFA is calling a "total cop-out" which leaves the door wide open to abuse.

"The acid test for disclosure is whether St. James' Place has to stand up and be counted. Under today's rules they don't," says SIFA managing director Ian Muirhead.

"The FSA is chickening out and has obviously succumbed to pressure from the restricted advice sector. It is a total cop-out."

He says the move will leave an open gateway for restricted advisers to hide their limited offering behind creative language.

"It is a huge contradiction to the FSA's stated aims for the RDR which is what comes of bolting on ethics as an optional extra," says Muirhead.

"Ethics depends on not being influenced by anything other than the interests of the client, which are necessarily compromised if the advice is restricted for the customer in a way the adviser would not restrict it if he were investing himself."

However Mark Ross, group risk director and RDR spokesman for Lighthouse, has welcomed the FSA's decision to drop its mandated wording for disclosure.

"Set wording risked being too restrictive and creating more problems than it solved."

"Of course it raises the risk of inappropriate disclosure, but the key to success has to be the outcome, i.e. that clients clearly understand what is being offered to them."

The regulator will monitor oral disclosure using a system of "mystery shoppers".

Ross says: "Mystery shopping is the obvious monitoring tool in this case but the key to a successful outcome is for the FSA to devote enough focus across the whole of the market place, including smaller firms who have historically have been dealt with by the FSA call centre."

But Muirhead says it is now up to professional bodies to demand demonstrable independence from their members.

"Professional bodies can make a stand for independence, even if the FSA won't."