FSA warns firms over unqualified advisers’ roles post-2012

Firms offering non-advisory roles to IFAs who fail to meet RDR requirements are being warned by the FSA to make sure they do not stray into delivering advice.

A number of firms are considering offering paid introducer roles to unqualified advisers or retirees after 2012 as they pass their clients on to a new, qualified practitioner.

These ‘lay advocates’ may sit in on meetings and be a point of contact for their old clients, but they will not be permitted to give financial advice.

Firms had sought guidance from the FSA about how the regulator would view this arrangement and admitted to concerns about unauthorised individuals “accidentally” advising clients.

The FSA hinted it would be firms’ responsibility to ensure lay advocates do not make recommendations to their old clients.

A spokesperson said: “The risk of former advisers who remain in contact with their clients giving unregulated advice depends on how the firm manages that risk.

"Any ex-IFA employed in this capacity, regardless of the job title attached, will have to be careful not to stray into advice.”

The FSA said it was not necessary to issue any further guidance on lay advocate adding: “The situation is very clear: Any adviser giving advice after 1 January 2013 must be fully qualified.”

Bristol-based Sovereign IFA and Glasgow adviser Intelligent Pensions are two firms planning to offer lay advocate roles to former IFAs after 2012.

Steve Patterson, managing director of Intelligent Pensions, said his firm intends to offer the role to advisers at the firms it acquires.

He said these IFAs will work as ‘investment agents’ for their old clients as they are gradually introduced to their new Intelligent Pensions adviser.

James Marchant, an adviser with Sovereign IFA, said his firm has acquired a sole trader business and offered the partner a non-authorised advocate role to “ensure a smooth handover of clients”.

Marchant said the firm will be selective to counter the potential risk of advisers straying into advice whilst speaking to clients.

“The non-authorised individual assists with fact finding and administrative tasks, nothing more,” he said. “The plus point is that the presence of said adviser should help to secure the relationship going forward.”

Firms say they will pay lay advocates in a number of ways: as a percentage of client fees, as a salary or as a fixed retainer.