The FSCA recently published various RDR (Retail Distribution Review) discussion documents for comment. One of the documents provides specific updates and requests input on several aspects of the adviser categorisation model.
Purpose of categorisation and proposed model
In the initial RDR paper the FSCA explained the purpose as:
The financial services customer should be in a position to clearly understand what services the intermediary with whom they are dealing, is providing, and in what capacity the intermediary is acting (i.e. the nature of the relationship between the intermediary and one or more product suppliers). This understanding is particularly important in the case of financial advice, to enable customers to evaluate the type and extent of advice they are receiving, including any limitations or restrictions on that advice, before deciding whether or not to act on it.
The 2015 Phase 1 RDR Update proposed a two-tier adviser categorisation model. In the latest discussion document the FSCA has updated this model in line with industry input and research, and in consideration of the practical implications of the proposed changes.
Terminology tested with customer
Under RDR there will only be two adviser models permitted: product supplier agents (PSA), currently known as tied agents, and registered financial advisers (RFA), currently known as independent brokers.
A concern for the FSCA is whether these terms will be appropriate to use as customer facing designations. Consumer research conducted by the FSCA indicated that the terms “broker”, “agent” and “tied adviser” presented challenges and were not understood by many consumers. The term “financial adviser” was the best understood by the focus groups. It appears a naming convention, which includes the word “financial”, is seen as more descriptive and is relatively better understood.
Potential designations – FSCA needs your views
The discussion document contains a number of proposed designations which will assist the public to understand who they are dealing with, and what they can expect.
| Designations to describe PSA tier | Designations to describe RFA tier |
| Product supplier agent Product supplier adviser Tied financial adviser Restricted financial adviser Aligned financial adviser Financial consultant |
Registered financial adviser Licensed financial adviser Non-tied financial adviser Non-restricted financial adviser Non-aligned financial adviser Financial broker |
In addition, advisers will be able to include broader descriptions on their business cards and email addresses:
“[Adviser name and designation], authorised to provide advice on the financial products and services of the ABC Group.”
“[Adviser name and designation], authorised to provide advice on the financial products and services of a range of product suppliers.”
The No sweat Shakespeare website has the following to say about one of the Bard’s most famous lines: “Juliet is not allowed to associate with Romeo because he is a Montague. If he had any other name it would be fine.”
How would you like to introduce yourself to clients? Please share your views with us.
Click here to download the RDR Discussion Document on Adviser Categorisation and Related Matters.
