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SRA recommends approval of restricted referrals

The Solicitors Regulation Authority is to recommend its board allows solicitors to refer clients to restricted as well as independent advisers for investment advice.

The SRA board is meeting on 28 November to decide whether to amend its code of conduct to allow referrals to restricted advisers. Currently the code states if clients are likely to need advice on investments they must be referred to an “independent intermediary”.

If approved, 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 its consultation in July, which closed in September. It says it decided to consult on referrals following the FSA changes to the definition of independence post-RDR. The FSA has defined independent advice as a personal recommendation of a retail investment product which is “based on a comprehensive and fair analysis of the relevant market” and is “unbiased and unrestricted”.

The SRA also argues there is a risk that only allowing solicitors to refer to IFAs might be contrary to its aim of ensuring the best client outcomes.

It consulted on 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.

SRA director of policy Agnieszka Scott says: “We had an excellent response to our consultation and we would like to thank all those who responded. We have taken on board the comments received, some of which have given us food for thought.

“However, nothing has changed us from our belief that the best way forward is to implement our preferred option, option three, and that is what we will be recommending to the board. This represents the best fit with outcomes-focused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss clients’ needs, not be restricted by a prescriptive rule.”

Jacksons Wealth Management managing director Pete Matthew says: “Choosing independent advisers over restricted is going become less of an issue so it doesn’t surprise me. I would rather see a distinction between financial planning and advice but don’t hold much hope just yet.”


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Barclays floats return to ‘vanilla’ products

Barclays Rich Ricci committee 440

Barclays has questioned whether banks should be offering consumers complex products and has suggested a return to simple, “vanilla” product ranges.

At a Parliamentary Commission on Banking Standards joint committee hearing this week, Conservative MP Mark Garnier challenged Barclays as to why it thought interest rate swaps were suitable for small and medium sized businesses.

Barclays chief executive of corporate and investment banking Rich Ricci argued the products can suit some firms, but said a discussion was needed about whether banks should be offering complex products.

Ricci said: “What we have seen is when we do make mistakes it is incredibly expensive. We need to take a step back and ask whether we should just be offering a very vanilla, very simple set of products that customers can agree to and understand. And if they want something more bespoke we just tell them we do not do that. Those spectrums are on the table and I think it is important to consider this given how expensive some of these mistakes are.”

Ricci admitted there were “some cultural failings” within Barclays but said most staff “want to do the right thing”.

Barclays is one of 11 banks that have agreed with the FSA to pay redress to SME customers missold interest rate swaps. The bank was also fined £290m in June by UK and US regulators for manipulating Libor.

Evolve Financial Planning director Jason Witcombe says: “Banks will offer whatever makes them the most money. But banks have to weigh up whether making lots of money is worth the reputational risk when these things inevitably blow up.”


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. Why does this not surprise me?

  2. David Trenner - Intelligent Pensions 26th November 2012 at 5:19 pm

    “James Espin | 26 Nov 2012 5:03 pm
    Why does this not surprise me?”

    It does not surprise you because you have studied the FSA rules and have concluded that the FSA want the term ‘independent’ to mean ‘unrestricted’, even though the dictionary thinks that they mean something completely different.

  3. A great result for SJP.

    It seems that regulation continues to favour the big boys and once again quality small firms will suffer.

    This has been government policy for decades and one only has to glance at any English High Street to see how successful it has been.

  4. The Champaign corks will be popping at SJP. If potential clients only knew, they’d be wearing black.

  5. The only sensible outcome. Good IFAs should have nothing to fear and don’t need restrictive practices to stay in business.

  6. What an EXCELLENT result and triumph for common sense.

    Well done – bring on the ICAEW to a spat of this too!

  7. What is the point of being Independent and, indeed, Chartered, if there is no commercial advantage.

    Solicitors should be seeking out the best for their clients but unfortunately they’ll get into bed with whoever is willing to give them the biggest backhander.

  8. SJP isn’t merely restricted ~ as far as all investment products are concerned, it’s tied. Of course, in light of its tie-up with an IFA firm in Glasgow, to which SJP agents have the facility to refer clients for whom topping up what they already have is likely to be a better option than investing in an SJP product, it pretends to be independent.

    It would be interesting to know just what percentage of all its transactions end up being into anything ther than SJP products. My guess is that the percentage is vanishingly minute. How can it be otherwise, given that said IFA firm will want its cut, therefore meaning less for the SJP agent? That poses a very obvious conflict of interest. On what basis is an SJP agent likely to recommend a course of action that will significantly diminish his earnings from any transaction? It just isn’t going to happen, is it, not least because SJP are targetted according to how much money they can shovel into SJP’s own products. How, if we’re to believe what SJP says, the FSA can be entirely happy with such a set-up is beyond comprehension.

    Then again, a good deal of what the FSA does is beyond comprehension, so I suppose we shouldn’t be surprised.

  9. This will make v. little difference. A decent Independent Financial Planner should be able to persuade solicitors of the benefits of independent advice, esp. if they can offer a non-product oriented service like cashflow planning and demonstrate the benefits. Many solicitors don’t need the current rule to know that their clients’ best interests are served independently. Some restricted advisers have a poor reputation amongst the legal profession anyway.

  10. This just go’s to show what people really think of the whole “Independant V Restricted” label

    They could’nt care less nor do the clients, the water is so muddy now even the herons have stopped fishing on this pond.

  11. The path for compensation or the satisfaction of a claim against poor advice should therefore extend to the solicitor referring if it transpires a client referral to a Restricted adviser should have been made to an Independent adviser; that would have meant a better client outcome. It gives licence to the ambulance chasing lawyers to extend their search for compensation and costs. If I were a lawyer, I’m sure my PI providers would need to be told and may even make exclusions for Restricted referrals. SJP and others may benefit but there will be plenty of lawyers out there not checking the small print! In reality, those Lawyers who understand and treat their clients as the best Chartered & Independent advisers do will always refer to them. Quality and independent integrity will always find each other.

  12. Ladies and Gents please do not get yourselves too distressed by this. I intend to stick at being independent but see no problem with restricted advisers getting referrals. The main reason for this is that a restricted adviser could be an IFA who decides not to advise on just say, anuities but does everything else from Jan 1st that he or she does now. Noone is going to tell me this adviser will give a worse service to a referral from a solicitor who needs investment advice. A good solicitor practice will have several IFA’s now anyway and should continue to do so post RDR. As long as the adviser can give whole of market advice to the referred prospect on the areas needed then no problem. To use my example above if I was the adviser who didint advise on annuities and the solictor’s client needed annuity advice then they woul not be reffered to me. Its so easy. As long as the solicitor knows the nature of any restriction he or she can refer to an appropriate adviser. Why would anyone have a problem with this?

  13. What a farce this predictable and pre-determined outcome makes of the previous consultation. How can the ability to refer Clients to sales-driven and product-promoting advisers possibility be in the best interests of Clients? This flies in the face of both common sense and all previous experience. It is interesting that the response of the Board to all the very valid and weighty objections received from so many individuals with real experience of the issues is simply a grudging admission that “some [of those responses] have given us food for thought” – with no attempt actually to describe either the food or the thought, let alone to provide an answer to those objections.
    Let’s only hope that the Board will listen to the reasoned and experienced arguments in favour of retaining the present rule (allowing referrals only to truly independent advisers) rather than the apparent recommendation of the officials, which is fraught with danger and the certainty of future mis-selling claims.
    But what would we know? We only have the benefit of experience, previous history and the opinions of our Clients to rely on – so let’s throw open the doors to the vested interests and undue pressures, and create more jobs for the FSCS in due course.

  14. Surely this is only a problem if you as an “independant” are regularly in competition with a “restricted” and lose business to them directly! If not then embed your relationships with your professionals as your proposition will always be better than theirs. If not then you really do have a problem!!

  15. “A great result for SJP.”

    A shameful result for solicitors and a terrible result for those clients who think the solicitor gettng a kickback is acting in their interest. I must say I am astonished, given the traditionally high level of protectiveness that solictors feel about ther clients.

    “Good IFAs should have nothing to fear and don’t need restrictive practices to stay in business.”

    True to a point, but there are many solicitors who don’t act with best client interests at heart. This does not help the clients.

    “What is the point of being Independent and, indeed, Chartered, if there is no commercial advantage.”

    It’s nothing to do with commercial advantage – it’s about being able to do the best for clients. If that then confers a commercial advantage then fine, but the advantage is not the be all and end all.

    Ian Coley
    Medical Investmemt Services

  16. To all of the commenters bemoaning the changes – do you really think you should have your business protected or clients dictated to by other professional bodies or rules? GET A GRIP!

    If independence can’t stand on its own two feet without protection then it deserves to go to the wall.

    This is not about SJP, however much some people would like to think it is. Why shouldn’t a solicitor be able to refer a client to a whole of market specialist investment manager (i.e. restricted) if that’s what the client wants? This looks like a grown-up decision by the SRA.

    Excellent comments from Marty and John Hutton and others by the way.

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