What is the difference between independent and non-independent investment advice?
What a firm must tell clients before advising, the conditions for calling advice independent, focused independent advice, and the rules for firms that offer both kinds.
By the ExamPass CY editorial teamLast reviewed 5 min read
Topic 10 of 12 · all topics in this chapter
Short answer
Before advising, a firm must tell the client whether the advice is independent, whether it rests on a broad or restricted analysis of the market, and whether it will provide a periodic suitability assessment. Independent advice requires assessing a sufficiently wide and diverse range of instruments, not limited to the firm's own or closely linked products, and the firm may not keep third-party inducements apart from disclosed minor non-monetary benefits. A firm offering both kinds must explain both, may not call itself independent overall, and no single adviser may give both.
Investment advice at a glance
| Point | Rule |
|---|---|
| Before advising | Whether the advice is independent; broad or restricted analysis (including closely linked issuers); whether a periodic suitability assessment will be provided |
| Independent advice | Sufficiently wide range, diverse by type and issuer, not limited to the firm's own or closely linked products |
| Inducements | Independent advice and portfolio management: no third-party fees or benefits kept, except clearly disclosed minor non-monetary benefits |
| Selection process | Number and variety proportionate to the scope of the service; representative of the market; own products proportionate to the total considered; criteria including risks, costs and complexity |
| If comparison is impossible | The firm may not present itself as independent |
| Focused independent advice | Marketed only to clients with that preference, who say they want only that category; checked in advance as appropriate for each new client |
| Both kinds offered | Scope of both explained; clients told on a durable medium, in good time, whether their advice is independent; independent label only for the independent service; clear separation; no adviser gives both |
| Since 2 August 2022 | Firms describe the sustainability factors considered in selecting instruments, where relevant |
Source: Law 87(I)/2017, Article 25(4), (7) and (8); Delegated Regulation (EU) 2017/565, Articles 52 and 53.
What must a firm tell clients before giving advice?
In good time before advising, the firm tells the client whether the advice is provided on an independent basis, whether it is based on a broad or a more restricted analysis of different types of instruments (in particular whether it is limited to instruments issued or provided by entities with close links to the firm), and whether the firm will periodically reassess whether the recommended instruments remain suitable.
The firm explains clearly and concisely why the advice counts as independent or non-independent and what restrictions apply, including, for independent advice, the ban on receiving and keeping inducements. It describes the types of instruments it considers, the range within each type, how the conditions for independence are met and the selection factors it uses, such as risk, cost and complexity. Since 2 August 2022 it also describes, where relevant, the sustainability factors taken into account. If it provides periodic suitability assessments, it explains how often, how far they go and what triggers them.
Terms used in this note
- Independent investment advice
- Advice based on a sufficiently wide and diverse range of instruments, given without keeping third-party inducements.
- Close links
- A link through a holding of at least 20% of the voting rights or capital, through control, or through both being controlled by the same person; advice limited to products of such entities cannot be independent.
- Minor non-monetary benefit
- A small benefit, such as generic information or a training event, that can enhance service quality and must be disclosed.
When can advice be called independent?
Independent advice must assess a sufficiently wide range of instruments available on the market, diverse enough in type and issuer to meet the client's objectives, and not limited to instruments issued by the firm, by entities with close links to it or by others with such close legal or economic ties that independence is at risk. The firm may not accept and keep fees, commissions or monetary or non-monetary benefits from third parties, except minor non-monetary benefits that can enhance the quality of the service and are clearly disclosed. The same inducement ban applies to portfolio management.
The selection process must consider a number and variety of instruments proportionate to the scope of the advice, representative of what is available on the market; keep the share of the firm's own or linked instruments proportionate to the total considered; and use criteria covering risks, costs and complexity and the characteristics of the firm's clients, so that the selection is not biased. Where such a comparison is not possible because of the firm's business model or the scope of its service, it may not present itself as independent.
What about focused independent advice and firms offering both kinds?
A firm may give independent advice focused on a particular category of instruments, such as ethical funds, only if it markets itself only to clients with that preference, requires clients to say they are interested only in that category, and checks before providing the service that it is appropriate for each new client because its business model fits what the client needs and wants to achieve. If it does not match, the service may not be provided.
A firm offering both independent and non-independent advice explains the scope of both, may not present itself as independent for its business as a whole and may not give undue prominence to the independent service. It tells clients on a durable medium in good time whether the advice they receive is independent, keeps the two services and the advisers clearly separate, and may not let any individual adviser provide both kinds of advice.
How to think about it
Independence is earned twice: by what the firm looks at and by what it does not take. It must look across a wide, representative market with unbiased criteria, and it must refuse third-party payments beyond minor, disclosed benefits. A firm that does both kinds of advice must keep them apart, down to the individual adviser, and may never wear the independent label for the whole firm.
Common mistakes
Letting a mixed firm call itself independent overall. It may present itself as independent only for the independent service.
Believing independent means no own products at all. Own or linked products may be included in proportion to the total considered.
Letting one adviser give both kinds of advice. No individual adviser may give both kinds of advice.
Treating focused advice as unrestricted. It needs targeted marketing, the client's stated interest and a prior check for each new client.
Legal references
- The Investment Services and Activities and Regulated Markets Law of 2017 (Law 87(I)/2017), consolidated Greek text on CyLaw (amendments up to Law 183(I)/2025) (opens in a new tab)
Article 25(4)(a)(i) (information before advice) · Article 25(7)–(8) (independence and inducements)
- Commission Delegated Regulation (EU) 2017/565 (MiFID II organisational requirements and operating conditions), as amended (opens in a new tab)
Article 52 (information about investment advice) · Article 53 (independent advice)
- Commission Delegated Directive (EU) 2017/593 (opens in a new tab)
Article 12 (inducements for independent advice and portfolio management, including minor non-monetary benefits), transposed in Cyprus by CySEC Directive DI87-01, paragraph 14
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