Firms who refer clients to restricted advisers for retail investment advice will not have their independence threatened after implementation of the Retail Distribution Review (RDR) rules, the Financial Services Authority (FSA) has confirmed.
The regulator today issued finalised guidance on independent and restricted advice, following on from the guidance consultation issued in February.
In a new paragraph, prompted by feedback it received from IFAs, it explained how referrals will affect status post-RDR.
"If a firm does not provide any personal recommendations on retail investment products (RIPs) to a client, and refers them to another firm instead (for example, a firm that provides restricted advice), this will not affect its independent status.
"We would, however, expect firms to undertake sufficient due diligence on a service before recommending it to their clients to meet their obligation to treat customers fairly."
Meanwhile the paper also clarified that it will be permissible to deploy a team approach, where the client has contact with multiple advisers, and still maintain independent status.
However, it reminded firms they would need a mechanism in place to ensure that any resulting personal recommendation meets the required standard, suggesting a particular adviser should have oversight.
Elsewhere, minor changes were made to make it clear that rules on inducements apply to both restricted and independent advisers, while it was also made clear that it is to model portfolios which include RIPs that the RDR rules apply.
However, it refused to explicity define the "other relevant fianncial products", beyond RIPs, which advisers must consider to remain independent, despite the feedback received calling for it.
The FSA also underlined its stance on MiFID II, saying it believed its rules will be compatible with the European directive, even though some respondents expressed concerns about differing definitions of 'independent'.
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