As a result of this, and a number of other problems inherent to the RDR definition, it is the WMA’s belief that the standard of independence outlined by the RDR should be replaced by the one set out in the Markets in Financial Instruments Directive II.
In a written response to the Financial Conduct Authority’s discussion paper on its approach to implementing MiFID II conduct of business and organisational requirements, the WMA said the MiFID II concept of independence “better reflects the generally-understood dictionary definition of independence (i.e. not influenced or controlled by others) than the RDR definition”.
“Article 24(7)(a) makes clear that, as well as assessing “a sufficient range of financial instruments available on the market etc”, advisers must not limit their advice to “financial instruments issued or provided by: (i) the investment firm itself or by entities having close links with the investment firm; or (ii) other entities with which the investment firm has such close legal or economic relationships, such as contractual relationships, as to pose a risk of impairing the independent basis of the advice provided,” it said.
According to the WMA, it is misleading for firms to give consumers the impression that they can consider all the types of products that may be suitable for their clients’ needs as it is “simply not practicable” to do so.
"It is misleading for firms to give consumers the impression that they can consider all the types of products that may be suitable for their clients’ needs as it is “simply not practicable” to do so."