A recent article in Money Marketing commented upon the impact the Solicitors Regulation Authority is about to have on the future shape of financial advice.
Ian Muirhead, Managing Director of Sifa, commented that many Independent Financial Advisers remain undecided as to whether to opt for “restricted advice” status under the Financial Services Authority’s new classification rules to be implemented by the Retail Distribution Review at the end of this year. A firm opting for “restricted advice” status will only give advice on a restricted range of products or providers. The deciding factor may well be the question of whether becoming restricted would disqualify them from working with solicitors.
The SRA’s Code of Conduct currently states that if solicitors’ clients require financial advice, they must be referred only to an “independent intermediary”. Since this term does not appear in the FSA’s new vocabulary the Code needs to be changed.
The SRA is set to consult the profession on the issue and, predictably, proponents of the multi-tied sales firms, those that will become restricted advisers under the new rules, have taken the opportunity to suggest to the SRA that the easiest solution would be to abandon the commitment to independent advice and permit solicitors to refer clients to all types of financial advice firms.
One would like to think that true independence, being a core principle of the legal profession based on the avoidance of conflicts of interest, would be the default option. However, industry regulators seem blind to, or unaware of, the gulf which exists between true independent financial advisers and product salespeople.
If the vote does go against independence, it is likely to be the solicitors’ profession which incurs the greatest damage. Solicitors’ reputations will suffer from involvement with the less scrupulous elements in the industry, and the Solicitors’ Compensation Fund will find itself saddled with similar levels of claims to that of the Financial Services Compensation Scheme. It is even possible to envisage product providers buying solicitors’ practices to provide sales outlets.
Swindells Financial Planning, of Seaford & Uckfield Sussex, has always given and will continue to give independent advice, and believe that this approach best serves our clients. Whichever way the SRA decides to vote, we know that this value of independence, in the true sense of the word, will sit well with many Solicitor’s firms who also hold dear the value of providing the best possible advice for clients.
