FCA approves 'independent' use of internal specialist advisers

17 October 2014. Published by Sarah Dowding, Senior Associate

Ever since RDR 'independence' rules were introduced nearly two years ago, financial advisers have sought clarification on referring clients to internal specialists within their firm for expert advice.

Many firms have freely acknowledged that they routinely refer clients to their own advisers who can do just that.  However, up until now, it has not been clear whether this met with specific approval from the FCA post- RDR.  Discussions between the industry and the FCA to clarify the position have finally been resolved in favour of the industry.

Last month, the FCA published a press release confirming that it is appropriate for 'independent' firms to refer clients to internal specialist advisers, provided that they had appropriate systems and controls in place to ensure the advice meets the required standard for "independent advice".  This is defined in COBS 6.2A as 'a personal recommendation to a retail client in relation to a retail investment product where the personal recommendation provided meets the requirements of the rule on independent advice'.  Those requirements are that the firm must ensure that a personal recommendation must be (a) based on a comprehensive and fair analysis of the relevant market and (b) unbiased and unrestricted.

The FCA's decision means that referring a client to an internal specialist adviser can meet the specific requirements.  In reaching this decision, the FCA has stated that this is in fact in line with the "wider interpretation" of the guidance on independent and restricted advice published in July 2012 (FG12/15).  That being said, I note that the FCA has, in any event, also confirmed it has updated both its website and recent thematic review to ensure clarity on a position which, until now, was far from clear.

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