What are the different types of Adviser?

What are the different types of Adviser?

As mentioned previously firms and individuals can only provide advice if they are authorised by the FCA to do so.

In this section we will look at the different types of financial adviser.

Why might a member use a Financial Adviser?

  • If they are uncertain or don’t feel confident about making financial decisions.
  • They don’t really understand what they should be investing in.
  • They don’t have the time to investigate all their retirement options themselves.
  • A member who is considering accessing new DC flexibilities may use a financial adviser after a referral from Pension Wise.
  • A member must seek appropriate financial advice (from someone who authorised by the UK FCA to carry out pension transfer business) if they are considering a DB to DC transfer with a fund value of over £30,000.

Financial Advisers are qualified and required to hold an Annual Statement of Professional Standing (SPS) certificate.

What does a Financial Adviser do?

A regulated financial adviser provides advice on:

  • retirement planning
  • investments
  • protection.

Independent Financial Advisers – must offer advice on all types of retail investment products across the whole of the market

Restricted Financial Advisers – are those who are limited by either the range of products or areas they offer advice on

Appropriate Financial Advice - there is a requirement for all DB transfer cases over £30,000 to  receive "appropriate financial advice" from someone who is authorised by the UK FCA to carry out pension transfer business.  The adviser may be either an Independent Financial Adviser or a Restricted Financial Adviser.

All advisers must ensure that they meet the "know your customer” requirements and most approach this by completing a "Fact Find”, which is a detailed questionnaire giving information on their customer so that they can understand their financial circumstances and attitude to risk. The information is used to identify which solution / product(s) would be best suited to their client’s needs.

Independent Financial Adviser

INDEPENDENT - Free from outside control; not subject to bias or influence.An independent financial adviser gives a personal recommendation to a customer. They must:

  • provide advice on the full range of retail investment products such as life policies, personal pension plans and packaged investments such as investment trusts and unit trusts
  • give unbiased and unrestricted advice based on their comprehensive and fair analysis of the relevant market

Restricted Financial Adviser

RESTRICTED - Limited in extent, number, scope or action.A restricted adviser differs from an independent adviser in the following ways:

Recommendations

They may only recommend certain products, product providers or both. Consequently they may only be able to offer a product from one company or just one type of product.

Product Advice

If they work for a product provider they are often limited to only offering advice on the products that the company offers.

Specialist Advice

If they chose to focus on a particular market they may only recommend products from providers in that market.The firm must disclose the nature of the restriction in their initial disclosure to their customers before providing a service.

Independent v Restricted

What are the advantages of one compared to the other?

  • The adviser has to attain the same professional standards irrespective of whether restricted or independent.
  • Where a firm offers both restricted and independent advice the firm cannot hold itself out as independent and must clearly communicate to customers what type of service they are being provided with.
  • An independent adviser will have to prove that they have researched the whole market relevant to the customer’s needs.
    The main difference is that the restricted adviser may be looking at a narrower range of products. From the customer’s point of view they will need to weigh this up against other factors such as cost and convenience.

Execution Only

We mentioned before that a detailed "Fact Find” is completed. However, a customer may know what they want or may choose not to receive financial advice.In this case the adviser proceeds on the specific instructions of the customer on an "execution only” basis.

As they are not giving advice on the merits of the transaction then the rules on assessing suitability do not apply. However, "clear and credible” evidence must be provided that an investment transaction is execution only. This is normally a statement signed by the customer or, if it’s an online process, there would be a disclaimer box to be ticked. The customer must agree that:

  • they are aware that the transaction is execution only
  • they have not asked for or received advice
  • it is their decision alone to take out the product
  • the business is taking no responsibility for the product’s suitability.
  • In transacting business on an execution only basis customers need to be aware that they may be giving up certain regulatory protections should the transaction subsequently prove to be inappropriate. 

How to find authorised firms and advisers

FCA Website 

Check the FCA website to see if a firm is Authorised and Registered

www.fca.org.uk

The Money Advice Service 

This is an independent organization set up by the government

www.moneyadviceservice.org.uk

Other organisations that can be used to check financial advice are:

  • Unbiased at www.unbiased.co.uk. Members can find independent and restricted ‘whole of market’ advisers on their website. Restricted ‘whole of market’ means advisers who can offer available products from all companies, but who may specialise in a particular area, such as pensions.
  • Personal Finance Society at www.findanadviser.org. Members can find independent and restricted advisers on their website.
  • VouchedFor at www.vouchedfor.co.uk. Members can find independent advisers only on this website.