ICAEW guidance on investment business referrals after the RDR

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The Institute of Chartered Accountants in England and Wales has issued guidance on its future approach to investment business referrals after the Retail Distribution Review (RDR). The RDR was introduced by the FSA to improve the quality of financial advice across the profession as well as the transparency of how consumers pay for the advice they access.

Under current the current code (Code 241.26) accountants should, broadly speaking, only make referrals to firms who are ‘independent’ – objective and giving objective advice. Overall from 1st January 2013, the distinction between ‘Independent’ firms and those with restrictions on access to all providers or products will become clearer, with any firm who is not independent needing to disclose their status as “restricted” advisers.

“Restricted” firms or advisers will represent those who either offer a full range of “retail investment products” (FSA term), from one or a limited range of providers; or those firms or advisers who elect to give advice from the whole of the market in terms of providers but choose to avoid advising on certain type of products, for example, structured products or Unauthorised Collective Investment Schemes.

In simple terms, the level of due diligence that an accountancy firm would reasonably need to demonstrate when introducing clients to an Independent firm of Financial Planners, a Private Bank, Wealth Managers or Financial Advisers should be much less than if they introduced a “restricted” firm.   Naturally, a firms status (whether this is ‘Independent’ or ‘restricted’) in isolation will not reflect its ability to meet the needs of a professional introducer and other areas will need to be considered, for example, areas of expertise, qualifications and personality fit.

The changes in the financial advice regulations from January 2013 will place greater emphasis on the need for accountancy firms to evidence a due diligence review on the organisations and individuals they introduce to their clients and this could be simplified by agreeing at firm level only to introduce clients to “Independent” firms who hold qualifications comparable to their own, for example; Chartered Financial Planners, Solicitors, Barristers, Chartered Financial Analysts and Chartered Wealth Managers.

This firm is committed to independence, and meets or exceeds all the FSA requirements for independence on the 1st January 2013, along with their other requirements. Specifically:

  • All our Financial Planners hold a current Statement of Professional Standing
  • We have operated an exclusively fee charging (as opposed to commission-led) model since 2008
  • We exceed the FSAs requirement to hold increased capital reserves (though the original deadline has been postponed)

1For example, Chartered Financial Planners, Solicitors, Barristers, Chartered Financial Analysts and Chartered Wealth Managers

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