IFAs who branch out 'may invalidate PI insurance'

08/03/2010

Written by Neil Pointon

There is an ongoing debate among independent financial advisers (IFAs) over whether they should stick to their niche area of expertise when advising clients, or branch out into offering recommendations on other products and services.

In an article for the FT Adviser, Tony Levene spoke to Karen Barrett, chief executive of Unbiased/IFA Promotion, who suggested that when it is of benefit to clients, IFAs should look at non-traditional products.

She explained that reaching beyond their pure product area was important for IFAs and could set them apart from their competitors.

However, Gordon Bowden, of Quainton Hills Financial Planning, said it could be "dangerous" for IFAs to branch out and that he preferred to only offer his expertise to clients in areas where he was experienced.

His comments were echoed by Dennis Hall, of Yellowtail Financial Planning, who said pressure to comply with the Retail Distribution Review (RDR) by 2012 meant advisers needed to focus on areas they specialise in.

"No matter how attractive an idea may be, new equals difficult. Besides that, dealing with non-regulated products could create problems with professional indemnity cover," he added.

Ian Boscoe, Director of specialist PI broker PYV, commented: "Gordon Bowden and Dennis Hall would seem to have it right. Film Partnership\Finance, Splits Caps and Zero Preference Shares, TEPS and certain structured products come to mind. However, in fairness to Karen Barrett, she appears to have simply said it would be of benefit to clients to have the opportunity of investing in non-traditional products. It would not be appropriate to interpret her comment to mean that IFAs should do so without taking appropriate steps to know the products and assess their suitability for their client."

The Financial Services Authority's RDR aims to ensure fair practices when it comes to the offering of financial advice, with full implementation planned for the close of 2012.


© 2010 Adfero Ltd.

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