Independent advice firms could be forced to offer restricted services unless the FSA scales back its definition for retail investment products in the RDR, the Association of IFAs (AIFA) says.
AIFA director general Chris Cummings says the scope of products the FSA now wants advisers to consider - including structured investments and exchange traded funds (ETFs) - is "simply huge", adding it would be difficult for firms to research the market effectively.
In last June's RDR consultation paper, Delivering the RDR, the FSA proposed a new definition for retail investment products to which its independence requirements will apply.
It said, in addition to the current packaged products, retail investment products should include unregulated collective investment schemes, all investments in investment trusts and structured products.
It said advisers should also consider other investments which offer exposure to underlying financial assets, including ETFs, as well as hedge funds.
"We have expressed our concerns [to the FSA] about the breadth of the independent label," Cummings says. "The scope is simply huge and a shocking unintended consequence could be independent firms forced into the restricted space.
"Firms are going to have to include products like synthetic ETFs. I read recently the value of whisky has not dropped in 50 years. Are IFAs going to have to consider whisky as an investment category?
"We don't want to get into a position where just because a new product has come on to the market, advisers have to give it an in-depth review and start advising on it."
The FSA is set to publish its final requirements for adviser labelling and the implementation of adviser charging in Q1. It will publish its final requirements for professionalism in Q3.
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