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SRA board approves restricted advice referrals

FSA e14 Building View 480

The board of the Solicitors Regulation Authority has agreed to allow solicitors to recommend restricted advisers for investment advice.

The board approved amending its code of conduct at a meeting in London today after the SRA recommended that referrals to restricted advisers should be allowed.

Currently the code states if clients are likely to need advice on investments they must be referred to an “independent intermediary”.

The new code will allow solicitors to put clients “in a position to make informed decisions about referrals in respect of investment advice”.

The SRA launched a consultation in July which put forward three options for revising the code’s wording: altering the language to align it with the FSA’s definition of independence, removing the rule on referrals altogether, and allowing clients and solicitors to make an informed decision about the type of adviser they refer to.

A total of 62 industry responses were submitted to the SRA. Of those who set out their preferred option, 26 responses were in favour of option one, one respondent was in favour of option two, and 22 responses were in favour of option three. Despite this feedback, the SRA has chosen option three, effectively opening up referrals to restricted advisers.

Sifa chairman Ian Muirhead says: “I think the decision is appalling. It will lead to solicitors permitting clients to engage with the wrong sort of financial advisers, which will give rise to misselling claims, which will damage solicitors, damage the profession, and damage the solicitors’ compensation fund.

“It appears the SRA made up its mind several months ago and has not been deflected by the majority of the responses which were in favour of the retention of the independent requirement.”

IFA Centre managing director Gill Cardy says: “This decision is flawed and defies the Law Society’s position. It is not in the best interests of solicitors’ clients and it must be reconsidered”.

Cardy is considering whether the SRA’s decision can be judicially reviewed.

She adds: “I cannot believe we are in this bizarre situation where solicitors, who prize their professional independence above all else, have agreed it is no longer appropriate to retain the requirement to refer their clients to other professional financial planners and advisers who also prize their independence above all else.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Get round the fact they havent been adhering to the rules for years any way.

  2. In a perfect world we would have polarisation and SIFA could continue its policy of aiming for what was clearly the best form of advice.

    In a perfect world because the FSA wouldn’t exist but they do and and they have cuffed the independent term into a different shape.

    Like APFA, SIFA is recognising the reality as opposed to the nice theory.

  3. I also think the decision is flawed – but perhaps it’s because Solicitors could see some of the issues around ‘Independent’ which seem less obvious to others? Gill Cardy makes a good point – that solicitors prize their Independence. But they do specialise. So if a solicitor considers him/her self to be Independent, despite operating in a very narrow field perhaps he/she considers that Independence is about more than the range of products an adviser advises on?

  4. I bet SimplyBiz is having second thoughts having bought SIFA to then sell on SIFA membership to its members!!!

  5. Well folks, you all know what looks good on a lawyer ……………………..a Rottweiler.
    On the other hand, how do you tell if a lawyer has been in a road accident? No skid marks in the road. A lawyer and a wagon wheel both need plenty of grease.

    Is it any wonder there are so many antipathetic jokes about lawyers?

  6. Harry, if only it were that simple…

    A Financial Planner is a guy who says to client: I’ve reviewed your financial situation, and if we manage your money properly, there should be plenty for both of us. Debating the issues is probably more constructive than generalised mud-slinging. Most IFAs and lawyers do an excellent job for their clients.

    How many IFAs refer clients to solicitors for specific services? How would they feel about being required to refer to a generalist solicitor instead of the specialist solicitor (i.e. restricted) they know can do the job?

    The FSA busted any value in independence when they changed the definition and based it on a range of products rather than quality of service (read ‘whole of market’). Somewhat ironic given the RDR’s claimed objective of focussing on advice rather than product sales.

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