Financial advice is all the same, right? Clients have their requirements mapped out, and investments, insurance, pensions, or whatever the solution is, are set up on their behalf and monitored regularly.
In that sense, they are the same. However, understanding the difference between an independent financial adviser and a restricted adviser is important because an independent financial adviser can recommend solutions from right across the market, whereas a restricted adviser is limited to the solutions they will offer. This tends to come in a couple of forms.
If you’re being advised by someone from Aegon or Aviva, for example, logically, they will recommend their own solutions, and they’re known as “restricted”.
This is a particularly common situation for those in workplace pension schemes who reach retirement and communicate with the company holding their retirement funds. It’s convenient, but you won’t know whether going with the life company that has managed your pension is your best option unless you ask an independent financial adviser.
At retirement, there is much to consider, not just the value of your annuity or drawdown strategy. For example, death benefits and enhanced annuities for medical conditions are two areas where a full market search is definitely worth doing.
Or, a firm like St James’ Place can operate on a restricted basis, whereby they have their own funds and restrict their advisers to these investments. Recently, St James’ Place, which manages more than £157 billion of investors’ money, found that only 5 out of its 45 funds (11 per cent) delivered value regarding performance.
All advice is valuable
This article doesn’t intend to denigrate the quality of the advice restricted firms offer. They will conduct a thorough Fact-Find and provide the best solution they can from the range they are allowed to recommend.
However, if you work on the assumption that choice is good for the consumer, you can see how a lack of options could result in poor value through expensive funds or poor performance, or if you’re really unlucky, both.