Firms offering unqualified IFAs 'lay advocate' roles post-RDR face a serious compliance headache, an investment consultant has warned.
Bristol-based Sovereign IFA and Glasgow firm Intelligent Pensions are set to offer existing IFAs non-advisory roles in which they introduce their clients to the business and then support them through the transition to their new adviser.
It is a means by which IFAs who do not wish to meet the RDR's new QCF Level 4 minimum qualification requirements can stay in the industry.
It also allows firms acquiring businesses or the client banks of retiring IFAs to welcome their new customers by presenting them with a familiar face.
Lay advocates, who will sit in on meetings and be clients' point of contact with their new firm, will be paid in a variety of ways, including a fixed retainer, a percentage of client fees and a salary.
However, Elliot Swatton (pictured), a partner at Gem Financial Services, has warned the arrangement could cause confusion for clients and put the firm in a difficult regulatory position.
"A client does not appreciate the difference between an adviser and someone in an advocacy role," Swatton said.
"The advocate sits in a meeting, cannot advise, but gets paid. Is that quasi-advice? How do you regulate that?"
Steve Patterson, managing director of Intelligent Pensions, said his firm intends to offer the role to advisers at the firms it acquires.
Patterson said these IFAs will work as 'investment agents' for their old clients as they are gradually introduced to their new Intelligent Pensions adviser.
He compared the arrangement to when retired solicitors or accountants accompany clients to meetings with IFAs, to provide "comfort and trust" in the new firm.
James Marchant, an adviser with Sovereign IFA, says his firm has acquired a sole trader business and offered the partner a 'non-authorised' advocate role to "ensure a smooth handover of clients".
Marchant said the firm will be selective to counter the potential risk of advisers straying into advice whilst speaking to clients.
The FSA said individual's job titles at regulated firms is secondary to the activities they perform.
"If advice is given, then that is a regulated activity," a spokesperson said.
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