A mate of mine is buying a field with a brick building on it. He wants to use the structure to carry on a small artisan woodworking business. It ought to be a simple transaction: the owners want to sell, the money is all there and planning issues, if any, are not insurmountable.
Yet the transaction has now dragged on for many weeks, the paperwork mired in a solicitor’s office and going nowhere fast. The two sets of lawyers appear to be dawdling along, spinning things out, taking their time, ignoring increasingly frantic calls from each respective set of clients. As my mate puts it succinctly, they are both “crap”.
I have a lot of sympathy for that view. My own direct experience of the legal profession over the years suggests the level of skills and knowledge of legal matters on the part of some solicitors, not to mention basic efficiency, is shockingly bad. Okay, some are very good, but many are not.
What is more, as of last week they will be given a further excuse to display their complete ignorance when it comes to meeting their clients’ needs. The Solicitor Regulation Authority, which oversees the way its members practice, has agreed to allow solicitors to make referrals to restricted advisers.
The apparent reason for deciding solicitors should no longer have to make referrals to IFAs is that the SRA board believes the term “independent” is no longer appropriate.
Earlier this year, the SRA board consulted on the three options: keeping the current rules, which state that referrals can only be made to independent advisers; abandoning the requirement for independence altogether; or allowing solicitors to refer to “restricted” advisers agreeing it first with their clients.
The SRA’s “consultation process” was interesting in and of itself. When it published its document some months ago, it had already indicated which way it wished to go – and that was in favour of abandoning a need for solicitors to refer only to IFAs. So for anyone to be surprised by its outcome would indicate a startling degree of naivety about how this decision was eventually arrived at.
What makes this “consultation” even more intriguing is that, as Money Marketing reported, the majority of respondents argued against the proposed change. Why bother asking people for their views if you then refuse to take them on board?
The final aspect of this change is that its rationale, as initially explained by the SRA board, was that “it reflects the possibility that under the new regime introduced through the FSA’s retail distribution review, many firms which are currently described as independent financial advisers or independent intermediaries may not be able to label their advice as independent because they will not, for example, advise on a sufficiently broad product range”.
The fact that, as surveys are increasingly beginning to show, the overwhelming majority of current IFAs intend to retain their independent status after December 2012, does not appear to have impacted on the SRA’s decision one jot.
Let’s also deal with the argument, advanced by one or two soon-to-be restricted advisers, to the effect that it is not they who are abandoning independence but the FSA that has moved the goalposts.
That sounds fine – except that the new SRA rules potentially leave the field open for solicitors to refer clients not just to former IFAs but to multi-tied salespeople. No wonder some large national firms that have never had anything in common with genuine independent advice are salivating at the prospect of winning business from gullible lawyers.
All of us should at this stage pay tribute to two organisations that have maintained a valiant rearguard battle to maintain the SRA’s original principles in favour of independent financial advice. One is Sifa and its veteran managing director Ian Muirhead, whose articles on the subject have appeared in countless magazines and websites over recent months.
The other is the Law Society, whose chief executive Desmond Hudson was quoted in MM calling for solicitors to ignore the SRA’s new rules: “The inevitable consequence will be solicitors may become more open to negligence claims based on these recommendations or referrals, with the profession as a whole becoming embroiled in the type of mis-selling scandal that has plagued the financial services industry in recent times.”
So what happens next? Maybe very little: over the years I have spoken to many IFAs who tell me that obtaining referrals from local solicitors has always been nigh-on impossible. To that extent nothing will change, probably.
Yet, as I have mentioned, some pretty large businesses with massive marketing muscle and no commitment whatsoever to independent advice are likely to move into this market. Once they get their foot in the door with a few dozen legal firms they can use that “success” on other prospective targets.
The ultimate irony is that trade bodies and so-called “restricted” advisers who junked independence will be by-passed by those for whom IFA status was always irrelevant.
Now that those trade bodies have abandoned the field of battle, it will be up to genuine IFAs to ensure solicitors remain true to their clients’ genuine interest and complain loudly if they don’t. Sadly, no-one else will do it for them.
Nic Cicutti can be contacted at email@example.com