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I want to appoint advisers, how should I go about it?

In the first of these fortnightly legal columns, I would like to look at the issue of employing advisers.

IFA practices often want to expand but want to be sure they are doing so with adequate protection. The issue with all contracts comes down to what do you want to achieve and what do you want to protect.

A bad employee can damage a business badly. The increase in damage limits in employment tribunals means more and more employees are taking actions.

Taking on someone on a self-employed basis does not mean they are deemed to be outside the employment tribunal jurisdiction. I have put forward sensible pointers which I believe all employers and employees should follow.

There is no need to have a written contract in law but it would be a foolish step not to where financial services is concerned. Financial services has a whole raft of custom and practice which is not adopted by all firms. Without a uniform standard, you need to be very careful.

A word of warning. The vast majority of disputes arise for one reason – that is people do not read what they are signing. Be careful with all business relationships. You would be surprised how many good advisers do one thing for their clients and the exact opposite for themselves.

What issues are important to consider?

The following issues are where you need to have a clear agreement.

Payment terms – how do you deal with indemnity? What happens if a person leaves or is asked to leave?

Professional conduct – What if the adviser&#39s work is queried? How far will you go as a firm to protect the adviser? Will you charge the adviser for management time taken to remedy a problem?

Restrictive covenants – IFA businesses are their clients. What protection will you need? What if a person leaves?

Are they barred from acting for your clients? What about timescales, geographical limitations?

Make sure that you have a written agreement with an adviser as the financial services industry is quite unlike any other. Without consideration of the above you have all the pitfalls, which you can create into a dispute.


I have an advi-ser who has left me having to repay large indemnity commission. We had no contract.What can I do?

Without a contract, you would have to rely on the custom and practice of the industry. If you can show that it is standard practice for your advisers to repay reclaimed indemnity commission, then you may be able to reclaim the amounts from your ex-adviser. Issue a letter reclaiming the monies and follow that up with a court summons if you are not satisfied.

All my advisers are self-employed does that make any difference?

No. The employment tribunals and courts will construe a employment definition very widely. If you have an agreement which controls methods of working and remuneration structures, then self-employment is merely a tax issue.

You cannot have things both ways – either you want the control of an employment situation or you do not.

I have been put to expense due to the negligence of one of my advisers.

Under the law of vicarious liability you will be responsible for an adviser unless they go off on a “frolic of their own”.

You can draft indemnities into contracts requiring reasonable costs to be recoverable where adviser levels have been lacking.

At the end of the day, this protection is not going to stop errors, merely make people more wary of committing them.

What is my maximum exposure if I receive a claim?

The maximum in an employment tribunal is £50,000 plus a calculation for loss of earnings, pension rights, etc.A court has a wider power to calculate losses much higher to reflect the agreement between parties.

I have been unfairly treated.What do I do?

The first thing is make sure you have as much evidence as possible. Second, look at your home insurance policy and see whether you have any legal expenses cover.

No win, no fee is a growing payment style in the legal profession. But be warned, complexities which financial services can throw up make this less likely.

If you have any questions for Money Marketing&#39s legal surgery, please email them to Please note that neither Money Marketing nor our legal correspondent can accept any liability for answers given to queries Gareth Fatchett is principal at financial services lawyers Armstrong Neal Financial Solicitors and a director of ProAct


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