The FSA (Financial Services Authority are setting a new standard for independent retail investment advice. The aim is to ensure that advice is genuinely independent and advisers consider all retail investment products when making a recommendation.
If a firm claims to be independent from 31 December 2012, it will need to:
- consider a broader range of products (retail investment products);
- provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market; and
- inform its clients before providing advice, that it provides independent advice.
To reflect the range of products that an independent adviser should have knowledge of, we have introduced the term ‘retail investment product’. This is wider than packaged products. It also includes structured investment products, all investment trusts, unregulated collective investment schemes (UCIS) and any other investment that offers exposure to underlying financial assets, but in a packaged form, which modifies that exposure compared with a direct holding.
If a firm gives advice on products from a limited number of providers, or only considers certain types of products, it will need to describe itself as ‘restricted’. Firms must disclose in writing and orally, before providing advice, that they provide restricted advice and explain the nature of the restriction.
Whether providing restricted or independent advice, the same suitability, professionalism and adviser charging rules apply.