Restricted view
Part of the debate centres on whether consumers are aware of the differences between restricted and independent advice. It is a regulatory requirement for advisers to outline their status to prospective clients, but research has suggested this has not necessarily been met.
In July 2017, consumer publication Which? conducted an investigation into the UK’s largest restricted advice firm, SJP, and found that of the 12 advisers it spoke to, a quarter did not explain whether they offered either restricted or independent advice. The mystery shopper had specified that they were looking to receive independent advice.
SJP also faced accusations of mixed messages on charges as part of the investigation. The company responded at the time by pointing to the fact that 98 per cent of its clients were satisfied with the value for money it provided, with four in five rating it as good or excellent.
As it stands, SJP’s popularity and expansion plans have continued unabated. The firm’s latest annual results, published at the end of February, showed that adviser numbers had risen to 3,954 – an 8 per cent increase in the past year. Pre-tax profits had risen 14 per cent to £212m.
A report by Plimsol, published in August 2018, found that SJP accounts for 12 per cent of UK adviser sales – twice as high a proportion as second placed Willis Towers Watson, and three times as many as Brewin Dolphin.
This also raises the question as to whether the vast majority of consumers seeking advice know the difference between restricted and independent, or indeed care for that matter.
According to Mr Ariyawansa, it all depends on how a firm’s proposition is marketed.
“I was at a well-known, vertically integrated wealth manager’s seminar recently, and left convinced they were independent. While they didn’t specifically state they were IFAs, the term restricted never entered the conversation and everything conveyed amounted to their superiority in all areas. There was no mention of fees either – this is highly misleading and deceptive.”
Mr Kavanagh takes a similar stance. “It’s not surprising that consumers are unaware of the differences between restricted and independent financial advice, or even which advice firms fall into which category,” he says.
“Restricted advice firms don’t actively promote that they are restricted; try finding this disclosure on their websites. And these differences aren’t regularly disclosed to consumers in the financial media.”
Bringing in new blood
At the last count, the status of advisers revealed the balance of headcount was still heavily tipped in the favour of independence.
The Financial Advice Market Review, published on June 30 2017, found that 83 per cent of advice firms operated on an independent basis, with only 15 per cent restricted (see Chart 1). One year on from the study, and despite the growing prominence of large restricted companies, this latter proportion had dropped to 14 per cent.
