Post-RDR, restricted advice is likely to account for the bulk of the financial services market. Most of the national intermediaries and networks are preparing to opt wholly or partly for restricted status and to offer a safe haven to IFAs, arguing that it would be a mistake to assume that restricted equates to multi-tie. Even AIFA, in denial of its name, has reconciled itself to the reality that its future depends on its willingness to embrace both the independent and the restricted communities.

What is the reason for this trend? The requirement that those claiming independent status must be capable of addressing a much wider range of investments may drive some IFAs towards restricted advice, and this certainly seems to be an issue for APCIMS, the Association of Private Client Investment |managers and Stockbrokers. However, this is unlikely to be the main driver.

More important is the greater business efficiency and lower regulatory demands of the restricted model. It is these factors which are influencing both current market players and the new investors who are poised to enter the market to ignore the independent model. To the extent that restricted advice is likely to be provided by larger organisations this will suit the FSA, and it is striking how the intention of the original RDR Consultation Papers to distinguish and promote independence has been progressively watered down to the point where restricted advisers will merely be required to make a verbal statement of their status to their customers, who are highly unlikely to understand what they are being told.

In addition, the IFA brand has been tarnished by mis-selling scandals; and St James's Place has demonstrated that the use of other descriptions, such as wealth manager, can be even more powerful in consumer terms, particularly when backed by slick marketing.

So, independent advice seems likely to be marginalised. But should it be written off? Happily, there are momentous developments outside the financial services silo which are set to give rise to the formation of new professional services entities in which financial advisers will have a key role to play. In addition to permitting these Multi-Disciplinary Practices ('MDPs'), the Act will permit commercial organisations, such as Tesco, the Co-Op, the AA and Saga, to offer legal services subject only to the regulatory requirement that they must have on their staff at least one lawyer providing services which are reserved to the profession.

The competition from these sources is predicted to cut swathes through the population of solicitors' practices at the lower end of the scale, and it is likely at the same time to drive other law firms up-market to where clients seek advice rather than standardised legal services. This is exactly where RDR is driving the independent fee-based financial adviser, and happily the professions, unlike the FSA, have not given up on the principle of independence. Both the Law Society and the Institute of Chartered Accountants insist that to the extent that their members provide financial advice this must be independent, and that they may only refer their clients to independents.

Accountants have always been more receptive than solicitors to the idea of involvement in financial services, but it is the private client solicitor whose mainstream work provides the greatest synergies; and solicitors are now actively looking for ways of protecting their businesses against the new competitors. Some, in response to the retail threat, are seeking salvation in branding, which they hope will enable them to compete with retail groups. The new umbrella organisation Quality Solicitors is spending a fortune promoting this concept. Some are developing web-based services which provide standard legal documentation, with advice available at extra cost. Others are thinking outside the box of traditional legal services and taking advantage of the opportunity to diversify and to reduce their dependence on transactional business. It is these solicitors to whom financial services is appealing.

Arms' length client referrals are likely to remain the main form of interaction, but the Solicitors Regulation Authority has effectively barred solicitors from being remunerated by IFAs and this has created growing interest in creating joint ventures from which the solicitors can receive a dividend as shareholders. There is also a growing awareness of the significant regulatory concessions afforded by the Authorised Professional Firm model, whereby legal and financial services are integrated within the same firm; and as a result of the Act IFAs will in future be able to be owners and managers of such firms.

IFAs have for long sought professional status, and integration with the established professions now provides them with the means of achieving this aspiration. Restricted advice has clear commercial advantages, but some IFAs will always feel as a matter of principle that they wish their clients to receive unrestricted advice, and for them the professions will be a natural home.

Ian Muirhead
SIFA