A thematic review by the Financial Conduct Authority (FCA) has found most advisory firms describing their service as ‘independent' appeared to use the description accurately.
Alongside the review, the FCA has also clarified issues for those firms that remain unsure what standards they must meet to be able to call themselves ‘independent' following the Retail Distribution Review (RDR).
One of the central elements of the RDR is that financial advisers operate as either ‘restricted' or ‘independent', for which they have to objectively consider all types of retail investment products to meet the investment needs of a retail client.
Nick Poyntz-Wright, director of long-term savings and pensions at the Financial Conduct Authority, said: "Most firms are using the ‘independent' tag correctly, which is important in helping consumers understand what service they are buying."
In response to calls from the industry for further clarification on the standards required for advice to be ‘independent', the FCA has published examples of good and poor practice within its review.
Together the examples will address a number of topics, including: providing advice on all retail investment products in a relevant market; referrals to other advisers; the use of product panels; the use of platforms; the use of model portfolios, which are a collection of funds with a certain asset allocation typically designed to meet a specific risk profile; and referrals to discretionary investment services.
In April, the FCA will be releasing the remaining part of the second cycle of research, which looks at how cost and services are disclosed by advisers.
The FCA has emphasised that it expects firms take on board its findings, review their practices and make any necessary changes ahead of it undertaking the third cycle of research, which is due to begin in the second half of this year.
