The common term we use for Financial Advisers is IFA, it’s in the public vernacular, my IFA helped with my pension, my IFA set up my will, my IFA takes care of my ISA investments etc. etc.
However, the majority of people we refer to in the UK as IFA’s are NOT actually IFA’s, they are actually FA’s because they are not independent they are tied agents.
So what does Tied Agent mean?
To be Independent, when selecting a product for you such as a pension, investment or ISA, an IFA is required to search for products from the whole of market, in fact, back in the days when everyday consumers could get pension and investment advice walking into banks like Natwest, Barclays, LLoyds and RBS, the main pitch from Financial Advisers was that they were Independent, so like a whole of market insurance broker, they would do the shopping around for you and get you the best deal (and earn a commission for doing so, which back then they often didn’t have to fully disclose).
In this scenario the tied agents were Natwest, Barclays, Lloyds and RBS, as walking into those branches, ‘you knew you were only going to be presented with that bank’s products and services’.
Why do more advisers choose to be FA’s then IFA’s?
In short, it is easier to pick from a smaller range of products than to be independent, there is less paperwork to complete to justify your recommendations as an adviser but mostly it’s because the Biggest FInancial Advice Firms who provide the best support in terms of Marketing, Compliance, Technology, Infrastructure etc. are mostly tied agents, the largest being St James’s Place, closely followed by True Potential Wealth Management, who actually grew their assets under management by taking on independent financial advisers and convincing them to move their clients over to True Potential Wealth Management’s platform (which whilst a great offering was often, like St James’s Place, a lot more expensive than where the clients originally transferred from).
Is there anything wrong with being a tied agent over an independent adviser?
There is nothing wrong with it as long as:
A) You don’t mislead people into thinking you are independent.
B) You do not move people from perfectly good products to your product just so that you can charge them money or earn a commission.
The bottom line is it all comes down to treating customers fairly. If a Financial Adviser helps you set up a pension, that’s a good thing and as long as he tells you he is a tied agent, and as long as he gives you regular annual reviews (if he is charging you for his services) then there is nothing wrong.
However, if you already had a pension and were only paying 0.3% per annum to that scheme and an adviser from True Potential or SJP moved you to their platform for significantly more, then they have increased your costs for no real benefit.
Does this mean FA’s are less qualified than IFA’s?
Absolutely not! Being a regulated financial adviser requires the same qualifications whether you are independent or a ‘tied agent’. There are varying levels of qualification and some of the most qualified financial advisers choose not to be independent for the reasons above.
How much money could you have lost dealing with an tied agent like St James’s Place or True Potential Wealth Management?
You will be amazed how much a 1% per annum difference on a pension, ISA or investment can have on your hard earned savings.
For Example:
A 1% charge of cost, on £50,000 invested over 10 years will cost you £7,433
You can do your own claim calculation using our Financial Adviser Claim Calculator here
When can you claim against a Financial Adviser for being a tied agent?
1) If you were convinced to move existing pensions and investments by a tied agent, if you have lost money as a result you may have cause to make a complaint or claim.
2) If the adviser did not disclose clearly that they were tied agents and not independent then you may have grounds for a complaint or claim.
3) If you have not received regular annual reviews from your financial adviser you may have grounds for complaint or claim.
4) If the adviser failed to disclose they were being incentivised to move you to a new product (hidden commission) then you may have grounds for a complaint or claim.
Summary
Due to increasing regulatory demands it is no surprise that financial advisers are choosing to drop their independent status and join the likes of St James’s Place Wealth Management and True Potential Wealth Management, however all customers are owed a duty of care from regulated financial advisers, independent or otherwise, which means being honest, open, transparent and making sure they deliver the services their clients are paying for.
Failure to adhere to any of these standards could mean a complaint and demand for financial redress where individual claims can be as high as circa £400,000!
St James’s Place put aside approximately £430 million for redress claims. Following an FCA investigation, True Potential’s Wealth Management arm have set aside a reported £100 million & Quilter’s Wealth Management arm put aside a reported £72 million for redress claims, and just like their competitors, have recently dropped their independent status. This would suggest that ‘Independent Advisers’ at Quilter have perhaps not all been selecting products from the whole of market as they are supposed to. You can read more about that here.
If you have any doubts at all about financial advice or the ongoing service you have received, we strongly advise you to investigate as soon as possible as claims against financial advisers can be time barred.
