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Independents can thrive despite SRA’s restricted referrals verdict

by Ian Muirhead on Dec 04, 2012 at 10:00

Independents can thrive despite SRA’s restricted referrals verdict

After months of consultation, the Solicitors Regulation Authority (SRA) has finally given its verdict over the question of referrals to advisers.

It has abandoned its commitment to independence, and will permit solicitors to refer to restricted advisers after the retail distribution review. Advisers who would now be deemed tied or multi-tied will therefore be allowed to gain business from the legal profession.

The SRA’s caveat is that solicitors’ clients need to be ‘in a position to make informed decisions about how to pursue the matter’. Solicitors will have to satisfy not only themselves but also their clients that any referral will be in their clients’ best interests. The solicitors’ regulator intends to issue guidance explaining the due diligence and record-keeping that will be required.

It has chosen to ignore the response to the consultation made by the Law Society, which warned that abandoning the commitment to independence could open up referrals to ‘providers with an agenda that is predicated on self-interest and tied arrangements rather than a transparent market-wide assessment’.

The double meaning of independence

The elephant in the room is that there are now two different meanings of the word ‘independent’. The dictionary definition, which will continue to be the meaning understood by consumers and solicitors alike, is that of being free from third-party influence.

The meaning the Financial Services Authority (FSA) is now seeking to persuade us to adopt attaches greater importance to the scope of the service offered than to impartiality. The regulator seems to have taken its cue from Humpty Dumpty: ‘When I use a word, it means exactly what I mean it to mean.’

In this situation, one can sympathise with the challenge the SRA faces in attempting to reconcile its own rulebook, which assumes the first meaning, with the FSA’s esoteric redefinition.

The beneficiaries

Among the beneficiaries of the relaxation of the SRA code of conduct will be those members of the Association of Private Client Investment Managers and Stockbrokers who, in addition to providing stockbroker services, provide multi-tied financial advice.

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2 comments so far. Why not have your say?

Mike WOI

Dec 04, 2012 at 10:38

Does any body really care, if your professional contacts are not made yet what difference is this going to make to your business plan.

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Terry Bignall

Dec 05, 2012 at 10:51

Most quality solicitors' practices will still only refer to Independent firms and require independent advice.

These are the practices that advisers should concentrate on.

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