The SRA’s decision to allow solicitors to refer clients to tied and multi-tied financial advisers may have significant implications for firms.
Prior to the recent change which came into force in January 2013, solicitors were prohibited to refer clients to tied and multi-tied advisers. The SRA requirement followed the Law Society rule, which meant that they were only permitted to refer clients to independent financial advisers for advice.
The SRA’s new Outcome 6.3 of the Code of Conduct states that when solicitors refer clients to third parties ‘clients are put in a position to make informed decisions’. The client must be provided with sufficient information about the status of the financial adviser in order to confirm their consent.
There is now, therefore, a compliance requirement upon solicitors to conduct due diligence and demonstrate that the selection of the financial adviser is in the client’s best interest.
Surely, the only appropriate referral should be to an adviser that provides impartial advice i.e. they are able to research the entire market to obtain the most appropriate investment solution for their client in the particular advice area needed. This would concur with solicitors’ code of conduct. It can surely not be in the client’s best interests to be referred to an adviser who can only sell products of one or two companies.
When meeting financial advisers it is important to establish whether they are contracted to sell products of one or more product provider. Other questions regarding their scope of advice, service proposition, areas of expertise and specialist qualifications would be useful in due diligence questioning.
A firm’s COLP should ensure that an appropriate process is in place where fee earners are referring to third parties. A central policy should be based on conducting due diligence and recording decisions for selecting an adviser or a panel of advisers. This should be communicated to all fee earners to ensure a consistent approach.
Tarvos Wealth can provide you with the due diligence required and documentation to meet your new regulatory obligations. An independent, Chartered Financial Planner firm, we are listed on the SIFA Directory of Professional Advisers, which is endorsed by the Law Society. This gives our professional contacts the peace of mind that we have all the credentials to provide impartial, objective advice to our mutual clients at a standard expected from a professional trusted adviser.