In response to the FSA’s Retail Distribution Review, Chris Cummings, director-general of AIFA, expressed his concerns that a redefinition of the term ‘independent’ to just advisers charging a fee could lead to a resurgence of tied advisers. He added that consumer detriment would inevitably follow, as consumers faced confusion over what advice they were receiving.
He said: “Unless we are certain we are bringing about improvement and not just change, we need to think seriously about doing it.
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“Independent has come to mean something in the eyes of consumers and it is one of the few brands that we have educated consumers about in that they think advisers will advise across whole of market and not sell at them. I think if we don’t maintain independent as a brand, we will have dilution and that is no good.”
However, Ashley Clark, director of Need An Adviser.com, commented: “The requirements for independence is for an intermediary to agree the charges with a client before going ahead with the work. If intermediaries are doing their job properly, whether they are charging a fee or commission is irrelevant.
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“The problem is not the use of the word independent, but the fact there are so many layers of advice. The terminology is so complex and clients don’t understand it. You are either independent or you are not. Independent is a powerful term and should not be thrown away. I agree with the regulator to a certain extent of starting to focus it down, but we should already have our fees agreed with the clients. Introducing more terminology is not going to help consumers.”
