The FSA recently published a list of FAQs from their roadshows on RDR. We’ve featured a few of them just below and have included helpful Adviser Workstation shortcuts.
**-If I consider a product, but I don’t feel comfortable recommending it due to its risky _nature, can I still call myself independent?
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__A firm should only hold itself out as giving independent advice if it is prepared to provide advice on all types of retail investment products that may be suitable for their clients. Such a firm may, however, after considering the market, take the view that certain retail investment products are unlikely to be suitable for their client base. If this is the case, then that firm would not need to carry out a comprehensive review of the market for these products for each of their clients. We would not expect firms when forming advice for a client to review the market for a product that would not be suitable, let alone to recommend such a product.
(Morningstar Quick Tip: Filter out any unsuitable products for your clients by building a custom filter in Adviser Workstation. See how to build a search by clicking here)
No one in a firm that holds itself out as independent should make a personal recommendation to a retail client unless that personal recommendation is based on a comprehensive and fair analysis of all types of retail investment products which may be suitable for that client.
(Morningstar Quick Tip: Use Morningstar Analyst Rating reports for independent, objective analysis on open-end funds, equities and investment trust funds. Click here to learn how to find the ratings)
-What is meant by relevant market in the context of independent advice?
_ **_A relevant market should comprise all retail investment products which are capable of meeting the investment needs and objectives of a retail client. To use the example of ethical products, for clients who only want these, it is clear that a range of products would never be suitable for them, namely non-ethical products. The relevant market for these clients would not include all retail investment products, but would include all ethical retail investment products. Relevant markets are defined by client needs, not by any other factor.
We expect it to be rare that an adviser could completely rule out advising on certain types of retail investment products on the basis that they will not be suitable for any of their clients, and to limit their advice to a particular relevant market. If they can identify a narrower relevant market, they should not hold themselves out as offering independent advice in a broader sense.
(Morningstar Quick Tip: Save a list of ethical and/or socially conscious funds to quickly add funds to a client’s portfolio. Click here to find out how)
Questions and responses taken from Financial Services Authority’s Finalised Guidance, February 2012. Click here to view the report and other FAQs