The FSA is being warned to be "especially aware" of firms operating in the restricted advice space using ‘weasel words' to hide their limitations and pass themselves off as independent practitioners.
In its response to the latest RDR consultation paper, the Institute of Financial Planning (IFP) says terms including ‘best of breed' and ‘whole of market', such as in fund choice through a single provider ‘bond' wrapper, should be outlawed for restricted practitioners.
"The FSA should be especially aware of the tendency of these [restricted] firms to use weasel words to hide their true status, and these should be specifically forbidden," it says.
"In the past, many firms who have chosen for commercial reasons to restrict their offering to consumers have attempted to disguise that restriction in order to maximise their commercial gain."
In the RDR Feedback Statement, the FSA says restricted advisers - those tied to one or more product providers - will need to explain to consumers both orally and in writing the limits of their advice.
However, the current proposals, which remain open for consultation, suggest the regulator will not be providing a template and firms will be able to choose the words they use to communicate this to clients.
The IFP says it "generally supports" the proposals in the RDR, arguing they will raise professional standards, wipe out commission bias and improve the consumer experience.
However, it is concerned by suggestions the FSA will intervene in the way firms remunerate their advisers.
"Firms should be encouraged to ensure they reward not just on turnover but on other factors that more clearly relate to quality of advice, customer feedback and profitability.
"However, it needs to be recognised that achievement requires reward and we are concerned the regulator should not unduly interfere with firms' internal remuneration policies."
It also says forcing firms to use more than one wrap proposition in order to retain its ‘independent' tag would be wrong.
"The IFP would be supportive of using a single wrap if sufficient range, independence and competitiveness are evident," it says.
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