I get 3 quotes every time I sell a bond; proves I’m independent

The product and the research medium may change, but the principal in the title is one that will probably resonate through many IFA practices as they strive to demonstrate their independence in a post RDR world.

But, is this really what independent v restricted is all about?

The answer goes a lot deeper and lies in the thought process that takes place before the specific product research even begins. The question that needs to be asked is why an investment bond is being recommended in the first place?

Let’s take investment bonds as an example.

Does obtaining 3 quotes or using one of the various research tools available qualify as independent research? Probably, yes, but that doesn’t necessarily mean your advice is independent.

Why is an investment bond more suitable for this client than say a unit trust or exchange traded fund?

There must be a reason and it may be that you consider investment bonds suitable for the majority of your clients, but there will be certain clients or certain situations where an alternative investment is more suitable.

The key to demonstrating your independence is defining these situations and documenting them.

Your business needs to be in a position where, if visited by the FCA, you can articulate to whom and when the various retail investment products (RIP) are suitable and if you do not consider a particular RIP suitable for your client bank documenting why not.

However; this shouldn’t be considered as purely an FCA tick box exercise.

Your clients will expect you to consider the suite of solutions available when helping them build a financial plan.

To implement solutions that help your clients achieve their personal and financial priorities should form an integral part of the financial planning journey you undertake.

Therefore, independence is about so much more than which investment bond. It is about having the knowledge and resources to help fit solutions to clients on a case by case basis.

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4 thoughts on “I get 3 quotes every time I sell a bond; proves I’m independent

  • I’d be very worried if anyone actually thought 3 quotes demonstrated independence. Frankly the product selection is a secondary issue. The real question is what does the client want to achieve? Truly independent advice means surely providing impartial advice about what is in the clients best interests… Which may be reducing debt, building cash reserves, giving the money away. Whilst RDR rules attempt to get there, in reality this is still product sales regulation, not genuine independence (don’t believe me? See what the FCA look at in RMAR) If the adviser is paid the same, whatever the outcome, then who could really argue against independence? Products are just solutions and a mix of them might be the most suitable solution. Advisers should have no vested interest in any single set of products, why would they? We all have valid opinion and experience about what is suitable, liquid, tax efficient blah blah… But clients don’t really care about that stuff, they want an honest answer to a sensible question about what’s in their best interests given their life scenario that they present.

    I believe the tension for most advisers is between placing money into an environment where they have a vested interest = funds under advice. OK we have the opportunity to charge on all FUA now, rather than simply collect trail on stuff that pays it, but there are issues here… Do you charge your FUA fee on that old endowment policy? In-house AVC or employers pension? All of which you provide asset allocation advice on from the available funds?

    This brings me to a current issue I’m wrestling with. Do I compare a new pension as an illustration without my advice fees against the existing pension which doesn’t include this? but if I’m being fair, should include a fee based on the value and projected value of the plan each year? I haven’t yet seen anything about this on blogs or press… But then I don’t consume it all. Would love some suggestions and thoughts.

    Reply
  • This may sound a bit pious but what the hell…..

    Over the past ten years as we have been getting paid by our clients – an annual AUM charge – we have come to appreciate the responsibility/benefit that comes with this process.

    We have to protect our income source as a first priority to ensure that we can remain in business so why would we ever do anything that would risk this ongoing relationship ?

    We naturally do our best to make sure that we provide the best solution available which demands independence as the norm for our business.

    Our activity also has to be easily understood by our clients as it is important that they understand why they are paying us each month. There is no point in doing something which has to be explained in a multi page suitability report.

    Such a report may cover our backs but it will not maintain our relationship if we have done the wrong thing.

    This is how we see independence coming naturally from the remuneration process.

    Charging on AUM may not be the ultimate answer but for us it has served to change the flow of money in our business and allowed our clients to become used to paying us for our service – and independence.

    Reply
  • I’d be very worried if anyone actually thought 3 quotes demonstrated independence. Frankly the product selection is a secondary issue. The real question is what does the client want to achieve? Truly independent advice means surely providing impartial advice about what is in the clients best interests… Which may be reducing debt, building cash reserves, giving the money away. Whilst RDR rules attempt to get there, in reality this is still product sales regulation, not genuine independence (don’t believe me? See what the FCA look at in RMAR) If the adviser is paid the same, whatever the outcome, then who could really argue against independence? Products are just solutions and a mix of them might be the most suitable solution. Advisers should have no vested interest in any single set of products, why would they? We all have valid opinion and experience about what is suitable, liquid, tax efficient blah blah… But clients don’t really care about that stuff, they want an honest answer to a sensible question about what’s in their best interests given their life scenario that they present.

    I believe the tension for most advisers is between placing money into an environment where they have a vested interest = funds under advice. OK we have the opportunity to charge on all FUA now, rather than simply collect trail on stuff that pays it, but there are issues here… Do you charge your FUA fee on that old endowment policy? In-house AVC or employers pension? All of which you provide asset allocation advice on from the available funds?

    This brings me to a current issue I’m wrestling with. Do I compare a new pension as an illustration without my advice fees against the existing pension which doesn’t include this? but if I’m being fair, should include a fee based on the value and projected value of the plan each year? I haven’t yet seen anything about this on blogs or press… But then I don’t consume it all. Would love some suggestions and thoughts.

    Reply
  • This may sound a bit pious but what the hell…..

    Over the past ten years as we have been getting paid by our clients – an annual AUM charge – we have come to appreciate the responsibility/benefit that comes with this process.

    We have to protect our income source as a first priority to ensure that we can remain in business so why would we ever do anything that would risk this ongoing relationship ?

    We naturally do our best to make sure that we provide the best solution available which demands independence as the norm for our business.

    Our activity also has to be easily understood by our clients as it is important that they understand why they are paying us each month. There is no point in doing something which has to be explained in a multi page suitability report.

    Such a report may cover our backs but it will not maintain our relationship if we have done the wrong thing.

    This is how we see independence coming naturally from the remuneration process.

    Charging on AUM may not be the ultimate answer but for us it has served to change the flow of money in our business and allowed our clients to become used to paying us for our service – and independence.

    Reply

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