Independent financial advice will ‘wither on the vine’ according to a report in the financial press earlier this week, with the director of a wealth management firm concluding the independent tag is already ‘meaningless’.
We disagree.
Since 31st December 2012, financial advice in the UK has been either independent or restricted.
Independent financial advice has always been, and remains, the gold standard of financial advice.
The new definition of independent financial advice means that advisers need to consider a broader range of retail investment products than before, as well as providing unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market.
That sounds to me exactly what most clients would expect to receive from their financial adviser.
Anything that doesn’t meet these high standards of acting in the best interests of investors is therefore restricted advice.
Independent financial advice is theoretically more challenging to provide than restricted financial advice.
Advisers providing independent financial advice need to consider a wider range of options and products before reaching their conclusions and making recommendations, so the research involved is more intensive and consequently the cost could be slightly higher.
Of course value is more important than cost; if paying a little extra (and the anecdotal evidence to date suggests it is restricted advice which tends to be pricier!) results in more suitable advice and better long-term outcomes for investors, surely it is a price worth paying.
Independent financial advice will not wither on the vine and it is certainly not already meaningless.
Investors continue to require advice which is independent, unbiased and considers all of the relevant market.
Restricted advice can certainly play a role for some investors with very narrow or limited requirements, assuming they understand the restriction and what impact this has on the advice outcome.
This assumes that restricted advice is much cheaper than the equivalent independent financial advice – which to date we have not seen evidence is happening.
Where independent financial advice will continue to shine is where investors want to work with an unbiased professional adviser who is acting in the best interests of their clients.
