Independent vs Restricted Advice

Whether you have an existing relationship with a financial adviser or if you are in the process of looking for guidance on managing your wealth, understanding how a firm operates is not only key to developing a successful professional relationship but is also required by the regulator.

Before giving advice, all advisers are obliged to tell their clients if they provide ‘independent’ or ‘restricted’ advice. This is so consumers know upfront what type of advice the firm offers. But what does this mean actually mean?   

Fundamentally, the difference boils down to the way in which the firm is able to research and  subsequently select a suitable product for the client. A firm giving independent advice must provide unbiased, unrestricted advice based on a comprehensive and fair analysis of the relevant market. This whole of market approach, permits the adviser to research every relevant product that may be used to meet the needs and objectives of the client. Only independent financial advisers can use the independent title as they are not restricted to the products and investments they can recommend

Conversely, a restricted adviser or firm will make recommendations from a narrow, more focused number of products and providers. This ‘restriction’ can be applied to both the products and underlying investments. A restricted financial adviser must make clear to you what their advice is restricted to.

Both approaches have pros and cons but it is important to remember that all financial advisers must be approved or authorised by the Financial Conduct Authority. Both independent and restricted advisers must pass the same qualifications, hold a statement of professional standing and meet the same requirements to ensure they are providing suitable advice under the same regulatory framework.

As a client, it is important to ensure that you understand what type of advice you are receiving. Your adviser should be able to clearly demonstrate their status and of course, justify the suitability of any recommendations that they have or will make.

This article is for information purposes only – should not be perceived as financial advice.