A Midland independent financial adviser has welcomed a new ruling that changes how solicitors refer clients who need financial advice.
McCarthy Taylor, which has offices in Worcester and Evesham, said the new guidance from the Solicitors Regulatory Authority (SRA) means solicitors should not refer their clients to financial advisers who have ties with the lawyer or the firms for whom they work.
The SRA’s decision and guidance to all its members follows the advice set out by the Financial Services Authority (FSA) in the Retail Distribution Review consultation paper which states that solicitors must not refer their clients to tied or multi-tied advisers. This follows a number of cases where tied and multi-tied firms have approached law firms which are seeking to enter into arrangements to provide financial services to their clients.
Paul Taylor, the managing director at McCarthy Taylor, said: “We are delighted that the SRA has taken this approach. We have long upheld that truly independent fee-based advice is best for the consumer. You are talking to someone who is looking after your money and you want to make sure you are taking out the most appropriate investment, rather than being persuaded to choose a product on which the adviser is able to make a commission and may not be best for your own particular circumstances.”
The Retail Distribution Review was launched in June 2006 to try to address persistent problems in the retail investment market. These included insufficient consumer trust and confidence in the products and services supplied by the market and the poor standards of practice of some firms, despite the supervision of the FSA.
The SRA’s advice states that “firms should always act in the best interests of their clients”. This means that they must refer clients to independent financial advisers where financial advice is needed or required.
SIFA is the support group for financial advisers partly or wholly owned by solicitors or accountants, or who have close links with the professions.
It said there was still confusion among solicitors about the status of financial advisers and this had resulted in breaches of the solicitors’ Code of Conduct. In one instance, a number of solicitors had been referring their clients on to St James’s Place, which is a multi-tied adviser. This had led to a number of complaints from independent financial advisers.
Independent intermediaries are different from multi-tied advisers (who are able to recommend the products of a limited selection of providers) and tied advisers (who can advise only on the products of one provider). Clients needing investment advice must not be referred to either of these categories of advisers.
Clients who ask to be referred to multi-tied advisers or tied advisers for investment advice should be informed that solicitors must refer them to independent intermediaries authorised to give investment advice.
The guidelines set down by the SRA add: “It is not a breach of the Code, however, to refer clients to multi-tied or tied advisers in respect of non-investment products such as general insurance contracts, pure protection contracts, and regulated mortgage contracts.”