Far from resolving itself, the independent vs. restricted debate seems to be gathering pace, and as firms spend the next six months truly focusing on business models and how they might have to change ahead of RDR’s implementation date, it will continue to hold court.
Firstly, one has to ask whether the classification of advice as independent or restricted really matters. From a straw poll of a gaggle of financial services professionals over the past few days (be they DFMs, regulatory boffins from fund houses or wealth managers) the answer seems to be "yes".
But that is where the chorus splits into multiple harmonies.
Negative connotations
Some think it matters because the term restricted has a naturally negative connotation, which is why advisers have shied away from associating themselves with the term, and will continue to do so until they can no longer avoid it.
Tony Dunk, marketing and investor relations director at St James’s Place, said: "I think the term restricted is much better than tied, which goes back to polarisation under the Financial Services Act in 1986. But from a client’s perspective this is going to be a bit confusing.
“Firms are finally realising this thing [RDR] is happening this year, as there has been an awful lot of speculation that it would be put back. From this they are starting to realise their model is not independent in terms of the new definition and they cannot be independent anymore.
Dunk said he thinks the FSA could have consulted further on the names, but admitted it is not easy to find names which are appropriate.
"Perhaps comprehensive and specialist would have been more suitable, with comprehensive replacing independent and specialist replacing restricted. The problem is, whatever you determine to go alongside independent, independent will just sound better."
The reason this is unfair is because everybody will have the same minimum qualification standard and so should be seen on par in terms of the advice they give.
Advisers’ personal bugbear
Another point made by Dunk is that it probably matters more to the intermediary community itself rather than clients, and this is something Scott Goodsir, managing director of UK wholesale at BNY Mellon Asset Management agrees with.
He said that as long as advisers are able to explain to clients why they are restricted and what that actually means, most clients will not care.
If intermediaries already have a relationship with a client and have built up trust over time, the banner they work under will be less relevant.
But in attracting new business, advisers will view the independent moniker as more important.
There are varying estimates from a whole range of sources when it comes to putting a figure on the amount of advisers that will class themselves as independent after RDR is implemented on 1 January.
A common theory seems to be that more and more will make the transition to restricted once some of their peers have dipped their toes in the water and shown that it is not all that bad.
There could come a time when striving to maintain independence just becomes too hard, particularly given the resources it will require.
While I can understand the reluctance to make the change too soon and that the fear of being pinioned must be a strong one, historically first-movers are compensated for their bravery.
Is it better to be a stubborn independent adviser, overworked and under-resourced, or a ‘specialist’ restricted adviser doing what he knows best and providing a continuity of service to his clients at the same time?
I know which I would rather, but let me know what you think below…
