Advisers cannot claim to offer 'whole of market restricted' advice without further explanation

The companies must fundamentally label themselves as either 'independent' financial advisers or as offering 'restricted' advice, Rory Percival, technical specialist at the Financial Conduct Authority (FCA) said, according to a report by New Model Adviser.

"We do not have a label of 'whole of market restricted'," Percival said, according to the report. "We have independent or we have restricted. Introducing a third category, is the client going to understand what that means? You haven't explained the nature of your restriction."

Under changes to the regulation of retail investment advice that came into effect at the end of last year, financial advisers are now required to inform clients whether or not the advice they offer is provided on an 'independent' or 'restricted' basis.

Under the RDR rules advisers are prohibited from referring to themselves as offering 'independent' advice unless the personal recommendations they make to clients on retail investment products are "based on a comprehensive and fair analysis of the relevant market" and are "unbiased and unrestricted". The RDR rules define a 'relevant market' as one which comprises "all retail investment products which are capable of meeting the investment needs and objectives of a retail client".

In July in the first of three reports to be published as part of the regulator's thematic review into compliance with the RDR regime, the FCA said that some financial advisers were claiming to offer independent financial advice to clients when they may not have a valid basis for doing so. It said companies "must explain the nature of the restriction" when providing restricted advice.

"We have not prescribed wording for firms to use when describing their restricted service, but firms should ensure that it is clear, fair and not misleading," the regulator said at the time. "We were concerned that a client would be unable to understand the nature of some firms' restrictions from some of the explanations we saw."

The FCA also said that it considered one advisory firm that directed 98% of its businesses to one platform provider not to be offering 'independent' financial advice. Another firm that operated a two-tiered advisory service was also considered to be offering 'restricted' advice, it said.

However, Percival has now said that the FCA will not presume advisers to be offering restricted advice where they used one platform predominantly, according to the New Model Adviser report. Judgment will be formed "on a case-by-case basis", he said.