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In the world of regulated financial advice, the taboo subject of Independent versus Restricted is rarely discussed. There is a perceived elitism of Independent Financial Advisers, whereas restricted financial advice is often treated as a restriction, rather than an efficient solution to managing a business whilst spending more time offering holistic planning to their clients.
Planning for retirement is about securing a comfortable and rewarding future, ultimately achieving the lifestyle that you desire. It is therefore essential to consider tax-efficient strategies that optimise your savings; by using your available tax allowances and reliefs each year, you can enhance your retirement income and ensure financial freedom in your later years.
Historically, restricted models often had disadvantages with controlled platform and fund costs, loaded protection premiums, all designed to provide more value to the distributor and firm and not the end client, but times have indeed changed.
Perhaps pre-built or pre-researched would be a more fitting label than restricted in the modern day. It also goes without saying that Restricted Advisers must still adhere to the same regulatory standards and conduct rules as Independent Advisers, ensuring that clients receive advice that is ethical, transparent and compliant with industry regulations.
Whilst looking at the term pre-built or pre-researched, it is important for clients to recognise that the term "restricted" does not necessarily imply a lack of options, rather, it reflects a focus on client outcomes, whereby the holistic and extensive research has been completed upfront. But what does this look like in practice; in building a restricted proposition, research starts with a full market analysis to find the most appropriate platforms that will fit the clients wants and needs, allowing for appropriate segmentation. It is also important to note that whilst not only being highly efficient, a high quality pre-built proposition does not need to be revisited on a case-by-case basis. Pre-built or pre-researched advice has therefore been narrowed to offer tailored solutions that align closely with the client's needs, objectives and risk appetite within an extensively researched range of products and providers.
An adviser or network will conduct due diligence on a wide range of products and providers and is oftentimes so excessive that it would far exceed the due diligence of an adviser that researches a product to meet a need. Some pre-built or pre-researched advisers choose to specialise in specific areas of financial planning such as pensions or investments. This specialisation can lead to a deeper and more nuanced understanding of the particular financial products or strategies within their chosen domain and by limiting their scope, they can cultivate a high level of expertise in the products or services they offer. This depth of knowledge can contribute to a more thorough and comprehensive understanding of the available options within their chosen field and offer a very comprehensive financial plan.
Platforms are in simple terms; the tax wrapper solution and they vary in functionality and cost and should be considered based upon the requirements of the client. What is important is building solutions that meet the objectives and needs of the client, in a tax efficient manner and helping clients with their life planning. Apply then the advent of Consumer Duty and the need to demonstrate fair value to clients, the scope of work increases even more for advisers, not only to conduct full research as to their propositions, but to test and continuously monitor and review these measures. Consumer Duty is not about finding the cheapest solution for a client, it is about designing, building and measuring your proposition in line with your clients needs, ensuring that they understand what they have and feel that they receive value from your services.
Restricted Advisers often establish strong relationships with specific investment providers. These relationships can offer clients additional benefits, such as competitive fees, access to exclusive funds, and enhanced service levels.
There is a home for both independent and restricted propositions, but it is often the term ‘restricted’ that means the emotional decision is made of “that isn’t right for my clients” or “I don't want to be controlled”. Many independent practices operate their models via Centralised Investment propositions (CIPs), but have they done all the due diligence that the FCA expects and now Consumer Duty demands?
It is widely expected that the regulator will begin to look behind the cosmetics of the CIP; both the expertise and the individual selecting it, the range of options for those wishing to stay as IFA and the process to refresh it. The reality is that the FCA will not give a warmup period and it will expect to see firms exhibiting many improved behaviours which may or may not be happening. As the FCA raises its bar, it will become more challenging, if not impossible for small, unsupported firms to meet these enhanced requirements.
In terms of the value of a firm, particularly for those thinking towards retirement, the lead into this is probably in the range of 3-5 years. Those firm owners thinking about an exit within this period, need to start planning and getting their business in order including their proposition, charging and servicing plans in a cost efficient way that mirrors their customer requirements i.e. not one size fits all.
In summary, restricted advice does not mean your options are limited, it means you have ruled out options that may not be suitable for your clients and is a time efficient way of ensuring that your research of the whole of the market has been delivered up front, ensuring that you can take advantage of time in the market rather than timing the market, delivering better client outcomes, which is what we are all seeking.
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