What do we mean by a restricted advice model?

What is a restricted advice model?

In simple terms, the restricted advice model involves limitations on the range of products and providers that advisers can recommend to clients. Unlike independent financial advisers (IFAs), who have the freedom to research the entire market for suitable solutions, restricted advisers operate within defined parameters.

The restriction in an advice model can vary significantly, from a narrow selection of in-house products to a curated panel of external offerings thoroughly vetted by the network.

At St. James's Place (SJP), for instance, although operating within a restricted framework, the scope of offerings is expansive. It is interesting to note that SJP starts from the same place as an IFA. They scour the entire marketplace to find the very best investments and products for their advisers and clients. They spend significant resources on researching and stress-testing every solution. On the investment side, SJP manufactures its own product range – meaning the funds are available exclusively to SJP clients. Today these funds are selected from over 40 leading, external fund managers, harnessing over 80 different investment strategies. The organisation then conducts meticulous ongoing due diligence on its product range, maintaining an active relationship with all external providers, ensuring a comprehensive suite of solutions for clients.

Can we really compare restricted and independent advice models?

Edward explains that attempting to draw clear-cut comparisons between restricted and independent advice models often oversimplifies the multifaceted nature of the financial advice profession.

“Both models aim to deliver optimal client outcomes, irrespective of whether you’re an IFA or restricted adviser, albeit through different operational approaches. It's not a matter of one model being inherently superior to the other; rather, each model caters to distinct client needs and preferences.”

Edward also explains that, with around 30,000 advisers currently operating in the UK, there’s a huge spectrum of advice styles: “It’s too simplistic to say: restricted advisers are like this, and independent advisers are like that. We’re all working towards the same goal of supporting our clients.”

Has Consumer Duty affected restricted and independent advisers differently?

Again, the emphasis on client wellbeing is the same across the board. However, Edward suggests that the small to medium sized IFAs might feel the regulatory burden stronger than others:

“As a small to medium sized IFA, putting a panel together, doing due diligence, and keeping that due diligence up to date is a massive undertaking. I know many IFA firms that are happy to do that, but for some firms, it takes them away from seeing their clients.”

The advantage of a restricted model like SJP is that the network has a significant team of people who are doing the ongoing due diligence. It saves advisers time from doing it themselves, or money from outsourcing regulatory support. “As one of the largest customers for many providers, we're also able to negotiate market-leading terms. The provider wants to make sure that we're distributing their product to their right target market as well – so it’s a win-win.”

However, it’s interesting to note that, for many years, the technical support available in the wider marketplace has reduced. Working with Technical Connection, Edward gets an increasing number of advisers outsourcing support through the consultancy’s services. “That’s the benefit of the restricted model at SJP – you receive all that support, helping you deliver great client outcomes.”

Are independent advisers more qualified than restricted advisers?

To advise in the UK, you need to have the Level 4 Diploma in Regulated Financial Advice. However, Edward emphasises there is a growth culture across the entire financial advice profession – regardless of whether you’re an IFA or a restricted adviser.

“It’s interesting to see what people do beyond the benchmark qualification. Many advisers choose to take the Chartered route, and in addition SJP also supports an MBA, an Msc, and a PhD alongside the University of Gloucestershire. The research undertaken helps develop SJP and the wider profession as well as achieving better client outcomes. There are IFAs who have done exactly the same and it is inspiring to see such commitment across the profession.”

Edward explains that growth and professional development is more of a mindset rather than a business model. It all comes down to the business you’re in, and how you choose to deliver client outcomes.

Choosing the right model for you

Edward concludes by saying that the decision between restricted and independent advice models should focus on what support you really need as a financial adviser to deliver great client outcomes.

“You can be really technical, but that doesn't automatically make you a great adviser because there's lots of soft skills that you need to learn. Ask yourself: What support do I need? What help will I get, and how will I get my clients? Do I feel I can do that all myself?

“It is worth having a look at SJP. See the support for yourself, rather than listening to other people who would tell you what they think it’s like, even though they've never experienced it.

“If I was an adviser, I’d be asking myself: what do I need, and is this organisation able to give me that help? That, for me, is the question you should be asking.”