Is your Financial Adviser truly independent?

Wednesday, 5th August 2009 14:26 - by Resident IFA

This Blog has always championed Independent Financial Advisers (IFAs). I believe they provide the widest choice and, often, the greatest expertise. After all, I like all the sizes and all the colours, not just Henry T. Ford’s ‘Any colour...so long as it’s black’ in relation to his first mass-produced car! Ok, so you might now be bought in to IFAs as the best option, but there are those advisory companies that sometimes ‘blur’ the definition in their favour. Only recently, the £0.9Bn stockmarket-listed St.James’s Place (SJP) firm of Financial Advisers has admitted that it does not fit into the IFA bracket. Any firm that does not offer whole-of-market coverage cannot be independent. As I understand it, SJP’s business model is that of a ‘Multi-Tied’ Adviser. By this, I mean that they have a number of their own products and relationships with a selected few other providers to provide a little more choice. For example, they have 48 available Pension funds, of which only 14 are managed by 7 outside specialist fund managers. This is not the end of the world and offers a far greater choice than you might find form your local Bank’s ‘Tied’ Financial Adviser, but still isn’t a patch on what an IFA will be able to offer in terms of choice. SJP's tacit admittance that they are not an IFA firm came as a result of recent guidance from the Solicitors’ Regulation Authority (SRA). Until now, SJP have targeted legal professionals to provide them with referrals of new business. SJP sent a note re: Investment advice to their Partners last month saying ‘the solicitor can only refer to an independent intermediary. The SRA view this as an adviser who can advise on products from across the whole of the market and offers the client the option of paying fees’. The organisation that represents IFAs working with Accountants and Solicitors, SIFA, seem cautious about this turn of events. SIFA’s Managing Director, Ian Muirhead, said ‘I’m afraid it is going to take more than this to get them (SJP’s Partners) to back off. The SJP salesmen are in denial – they will not admit to themselves that they are not independent’. I hope none of this independent status talk is an eye-opener if you deal with SJP now or have done in the past, but I would urge you to examine your Adviser's regulatory documents to confirm their true independence. Reading their ‘Client Agreement’ document should help to this end. Until next time...