Alternative investments should be on independent advice agenda Go compare with our comparison table

Alternative investments should be on independent advice agenda

02 September 2010 / by Paul Dicken

Financial advisers need to gain a working knowledge of the alternative investment models available if they are to remain independent, a financial research firm has warned.

Defaqto has produced a free guide to alternative investments in response to the Financial Services Authority (FSA) Retail Distribution Review (RDR) which is making reforms to the retail investment market.

The guide covers a range of asset classes and alternative investment vehicles, including property, private equity, structured products, investment trusts and hedge fund techniques.

The FSA review has led to the publishing of policy statements, including policy statement 10/6 which looks at the clarity with which firms describe the services they provide and the potential for payment to advisers to distort the outcome for a customer.

This FSA is going ahead with proposals to require firms to describe their services as either ‘independent’ or ‘restricted’; changes coming into effect by the end of 2012 will mean a firm offering independent financial advice will be expected to ‘conduct a comprehensive and fair analysis’ of  a wider range of products.

Author of the guide and insight analyst for funds at Defaqto, Fraser Donaldson, said: “Although it is possible for firms to decide that certain products would not be suitable for their clients, this cannot be used as a get-out clause as the policy goes on to say that the firm is expected to demonstrate clearly why a particular market or product is not suitable.”

Donaldson said even when investment is outsourced by the adviser to a multi-manager or discretionary manager the regulators will still expect advisers to make a judgement on whether the range of investments used are suitable for clients.

Publishing the FSA policy earlier this year, Sheila Nicoll, FSA director of conduct policy said: “If this market is to survive, and thrive in the future, people need to know their adviser is acting in their best interests, and is well qualified to carry out that role.”

© Fair Investment Company Ltd

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