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Introduce Yourself

The amount of business coming to IFAs from lawyers and accountants could

rise substantially after November 30, when these professionals face the

prospect of direct regulation by the FSA. Many might find it unattractive

to continue carrying out only a small amount of financial advising.

Bentley Jenisson Financial Services managing director Paul Howard believes

this is a big opportunity for IFAs to bring new clients into their business.

Being part of an accountancy-based practice, he expects to have work

referred from solicitors with which his practice has links.

However, opinions on the desirability of close relations with fellow

professionals are divided. While some IFAs rely heavily on introducers,

others see such relationships as more bother than they are worth.

Inter-Alliance is one of the organisations that has set out its stall for

accountants and lawyers. Spokesman Charles Ansdall says: “We see it as

incredibly beneficial. The relationships require time and effort but are

long term and yield great benefit.”

From the other side of the fence, Brooke Christian & Co senior partner

Stewart Brooke says: “To be honest,I find it easier to do without

introductions from accountants and lawyers.”

Differences in remuneration structures can cause difficulties although the

debate on professionalisation is encouraging more IFAs to move towards fees

from the traditional commission basis.

The issue arises when introducers expect to be paid for their

introductions. In Brooke&#39s experience, the relationship with accountants

tends to be more fraught than with solicitors. He says: “They expect us to

give over half our remuneration, when they would themselves find it hard to

do business on half their usual remuneration.”

While the relationship is often described as mutual and reciprocal,

perhaps no one will raise an eyebrow to learn that lawyers and accountants

do not share their fees with IFAs – it is only the IFA&#39s commission that is

up for grabs. When an IFA works on a fee-only basis, the introducer does

not usually get any money.

Commonly, the agreement between IFA and introducer is for 50 per cent of

of the commission of the initial transaction, with a diminishing percentage

for further transactions.

Brooke points out two issues. The first is clawback liability. Second is

the difficulty in determining for how long into the relationship the

introducer is legitimately allowed to claim an interest.

Aifa technical officer Linda Chandler identifies another consideration.

Accountants might want to have access to information that the IFA has to

keep for regulatory purposes.

Chandler says Aifa has not had reports of difficulties or disputes arising

between IFAs and other professionals. However, her advice is for IFAs to

have an agreement in place which covers all the issues that could arise.

Howard says his firm has proper third-party introducer agreements which

have to be ratified by a compliance officer. He emphasises the importance

of good records. “We never lose sight of the fact that a client was

introduced. For instance, we would not recommend they go to see a different

set of solicitors. There is a considerable danger of putting your foot in

it,” he says.

Not only the impending prospect of FSA regulation of accountants and

solicitors but also the Trustee Act has meant an increase in interaction

between solicitors or accountants and IFAs. Often, it can just be a case of

a solicitor or accountant wanting to ensure their client does not fall into

disreputable hands but more usually it is a commercial relationship. For

example, of 700 joint ventures with solicitors and accountants on

Inter-Alliance&#39s books, 535 are on a contractual basis.

An FSA spokeswoman says the FSA is about to send out documentation to

2,500 professional firms which will have to become fully fledged IFAs if

they are to continue giving financial advice. It is not known how many of

them will give up offering financial advice but many IFAs are already

beginning to market themselves to take advantage of what they see as a

business opportunity.

Inter-Alliance is running special training seminars to prepare its RIs to

take advantage of this opportunity and is involved in the Association of

Chartered Certified Accountants&#39 IFA introduction scheme. The Law Society

has a similar scheme – Solicitors&#39 Financial Services.

Courts Independent Financial Services partner David Wingar is another IFA

for whom introduced business forms a strong part of his practice. He has

two pieces of advice for IFAs seeking to follow his example: “Be prepared

for it to take some time. The best way is to hold seminars and offer

yourself as an advice practitioner.

“Also, my best successes are when the accountants and solicitors are my

private clients as well.”

John Stones


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