Advisors are flouting new conduct code

bigfreddiel

At the risk of upsetting any As/FAs/IFAs on this board this was in the ST http://www.thesundaytimes.co.uk/sto/business/money/investments/article1292712.ece

Here's a snippet:

.....the FCA said it had visited firms which, though calling themselves IFAs, had a set list of products. As a result, investors might be unable to access the best funds......

And this, David Crozier of Navigator Financial Planning stated "Maybe people assume we're still all commission-hungry salesman, but we're not". Doesn't this implies you were commission hungry once, pre-RDR? Mail On Sunday - July 28 2013 - Page 89

Don't moan at me moan at the ST and MoS

cheers

fj

Aegis

For anyone that wants to read the actual report rather than the sensationalist reporting on the content:

http://www.fca.org.uk/your-fca/documents/thematic-reviews/tr13-5

In response to the particular claim made here, the word for word quote was:

"We visited a few firms where advisers described themselves as independent but we had concerns about the validity of the claim. We found examples of the situations where we considered firms may not be independent in practice were:
• almost all business being placed with one platform (see example below), and
• having a pre-determined list of products or investments (see example below)."

Without considerably more detail, it's very difficult to know exactly what they found, however at first glance this is far from being restricted. I think it's good practice to have more than one platform at the ready in case a client with a different profile to the typical firm client arrives on the scene, but many firms have long-established ties with single platforms with which they have special terms that make it possible to place most of their investment business with that platform. In fact, the FSA prior to RDR stated that it felt it would be difficult - not impossible - for a firm to be independent if it only offered one platform. There's little further information as to how the researchers came to the conclusion that this was a major problem for independence.

As for having a pre-arranged list of funds, that's largely sensible, and shouldn't impact on a firm's independence unless there is no potential to deviate from that list once specific client circumstances are known. This type of centralised research allows firms to carry out a significant level of research on the market to determine which funds they would prefer to use in each sector, saving adviser time and therefore client money compared with researching everything from first principles each time.

All in all, the findings of this research were actually largely positive, saying that most firms visited were embracing change and adapting well to the new requirements. There is certainly no mention of widespread flouting of the rules, which is what the linked article in the OP seemed to imply.

Shoddy journalism really.

dunstonh

I thought the tone of the report was actually encouraging. The FCA also followed it up with examples of what it that was good and not good. If that is all they have found so far then things are very good.

.....the FCA said it had visited firms which, though calling themselves IFAs, had a set list of products. As a result, investors might be unable to access the best funds......

Doesnt say that in the FCA report though. That is a media conversion to make it sensationalist.

At the risk of upsetting any As/FAs/IFAs on this board

Not upset at your posting. My disappointed at how the media twist what was actually an upbeat report. Also remember that the FSA was well known for not issuing guidance. It always took a stance which meant you had to interpret wishy washy guidelines and it wouldnt explain. The FCA is being much more helpful by giving that guidance. It is a shame the FSA didnt think about doing that in the 6 years leading up to RDR.

SnowMan

I think it is worth quoting the overall findings from the report

Our findings

Firms have made a lot of progress. Generally, firms had acted to implement the new requirements and were open to our feedback. We were pleased to see that many firms’ propositions were in line with the new rules. Some firms had also tried to make their disclosure material clear and engaging.

We identified two main areas where more needed to be done. First, while there was evidence of good practice, some firms were not providing clients with some or all charges in cash terms. Second, some firms fell down by not being clear what ongoing services they would provide. These findings were common in the sample of firms, suggesting other firms may not be meeting these rules.

We also found that while most firms were providing their generic charges in good time before making a personal recommendation, some were not. We were also concerned that some firms, while describing themselves as independent, were not offering a truly independent service. Some firms providing restricted advice were not adequately describing the nature of the firm’s restriction.

The consumer research conducted in tandem with this qualitative study clearly demonstrates the importance of firms providing clear information so clients understand the costs of advice and the service they can expect.

The research showed consumers appreciate timely information. This should provide a message to those firms that are not yet giving clients information on charges early enough.

What is more, the research highlighted the need for firms to make it clear to their clients whether they are restricted, and how they are restricted. This is to avoid prolonging the assumption that these firms are independent.