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SRA to launch consultation on IFA referrals

The Solicitors Regulation Authority is consulting on whether to change its requirement for solicitors to refer clients to independent financial advisers for investment advice.

The SRA plans to launch the 12-week consultation following its board meeting on July 4.

Currently, the SRA’s code of conduct states solicitors can only refer clients who need investment advice to independent intermediaries who can advise on investment products from across the whole of the market and offer a fee option.

An SRA spokesman says: “The SRA is looking to go out to consultation, with the board’s approval, from July 4. There are a number of options on the table, which we will announce on that date.”

Personal Finance Society chief executive Fay Goddard believes the SRA should allow referrals to independent and restricted advisers who do not have any contractual ties to providers. She says: “The real meaning of independence is that the adviser has no conflicts of interest or contracts that influence its ability to act in the best interests of clients.

“We think it would be a sensible solution for the SRA to allow referrals to these advisers, whether they fall under the FSA’s new independent or restricted labels.”

But Sifa managing director Ian Muirhead (pictured) says: “Solicitors will be disinclined to spend time researching firms’ contractual arrangements. The requirement for solicitors to refer clients to IFAs should remain in place.”

Aegon head of regulatory strategy Steven Cameron says the company has had many enquiries from IFAs about whether they will be able to continue to accept solicitor referrals after the RDR.

He says: “Advisers need clarity on this issue as soon as possible, so they can decide whether to go down the independent or restricted route.”


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. I have no axe to grind with this as I dont use solicitors or accountants s introducers but it seems to me that if they maintain the status quo of Independent only it could be short lived. What are they goingto do in a few yers time when the are only 10% of the current IFA community still operation under the forthcoming FSA definition and they cannot find someone local. As most advisers currently fall under the “restricted banner” according the new definition but still offer whole of market advice, surely it is important to have this as the main thrust. I would bet my house that the huge majority of business done in the UK via solicitor referrals end up with the client getting a packaged product (ISA UT/OEIC/pension/or bond). I accept there will always be exceptions.

  2. Phil Billingham 31st May 2012 at 10:36 am

    Is there a clue that the consultation starts on Independence Day?

  3. Baron Bolligrew 31st May 2012 at 11:03 am

    Wasn’t it inevitable that this would happen? Especially so soon after a lawyer was fined for referring clients to a tied adviser?
    As lawyers look to squeeze every penny they can out of what they do (jus like everyone else) they know that they can earnsomething from introducing to….tied advisers.
    Yep, this is all about allowing somicitors to introduce to tied advisers who are the one’s most likely to pay for the introduction…ans also the ones who are most likely to ‘fudge’ their status by referring to themselves as ‘independent TAX advisers’….yeah, right.

  4. Most solicitors are already dabbling in this area through the old boys network at the yacht/golf club. As an IFA I don’t recommend any solicitors because I haven’t found one yet I would trust my clients to. Solicitors should stick to the law and not ‘dabble’ .

  5. John Joe McGinley 31st May 2012 at 12:12 pm

    I think the gray area is the large number of advisory firms considering the hybrid structure offering both independent and restricted advice but who cannot call themselves Independent post RDR.
    They will still have the capacity to offer independent advice so why should they be stopped from having referrals from Solicitors.

    An interesting debate awaits us me thinks and hopefully common sense will prevail.


  6. John Blackmore 31st May 2012 at 12:14 pm

    The FSA have opened a can of worms with their new Alice in Wonderland definitions.

    Solicitors and Accountants – if they refer – should be required to refer to the most appropriate adviser. This no longer automatically means Independent.

    Where appropriate means a GP then the new type of IFA generalist may well be appropriate. Where specialist knowledge is required then Restricted may be appropriate.

    The only requirement should be – what is best for the client. This may be Independent or Restricted.

  7. Solicitors need to be very careful in providing referrals – if the adviser they introduce is not independent, then the solicitor has (potentially accidentally, but still in a negligent fashion) introduced a client to a service that cannot be deemed truly independent. This has automatically limited the client’s ability to be given full market scope – the adviser will provide a holistic approach, and only a truly independent adviser will supply truly independent advice.

    Some of you will think this attitude is splitting hairs, but solicitors are (hopefully) cautious creatures, and won’t want to stick their heads in a noose.

    Furthermore, there are many IFAs taking great pains to retain true independent status – by not recognising this, then one has to ask the point of why RDR is being implemented if not to raise the profile of advice in the industry, with true IFAs gaining a greater degree of professional standing and recognition?

    Of course the likes of CII and IFS exam boards win either way….!

  8. Is the solicitor working as agent of the client or of the investment firm? Correct me if I am wrong, but the RDR is not changing the law of agency?
    I can see both John Blackmore and Chunter’s point although they appear at first at odds.
    Who is restricting the advice? If it is the client, it is NOT restricted advice, if it is the adviser saying I will NOT or I cannot (other than Occupational Pension Transfers. Mortgages, Long Term Care or non investment linked Life&Illness cover), than the adviser is restricted and the nature will need to eb explained.
    IF the nature of that restricion is a tie to particular product providers (SJP for example), or that the advisory firm will ONLY use one wrap, whatever the client needs (important) / wants (not if what they want is not what they need), then the restriction is nto juts a restriction, it is a TIE. The solicitor in reccomending a restricted firm who is tied, is making a value judgement on the investment and thus giving regulated advice which they may not be authorised to do OR they are acting as agent of the provider/advisory firm by receiving a commission/fee which means they are no longer acting as agent of the client and hence this would have to be disclosed.
    If the solicitor reccomended a restricted adviser who was only restricted by qualification level or an area they CHOSE not to advise on, then teh level 4 exam requirement covers the absic syllabus to the lvel where the adviser should eb able to pass on to ANOTHER adviser who ahs no ties, but is qualified in that area.

  9. The SRA have no teeth anyway. Or at least they are not prepared to use them. I have two large local firms one is buddying up with Barclay’s Wealth, the other is very much in bed with SJP. We’ve mentioned their “oversight” to them and it fell on deaf ears.

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