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How the client ownership debate is unfolding

by Michelle Abrego on Feb 11, 2013 at 13:48

How the client ownership debate is unfolding

A year on from the legal battle between national firms Towry and Raymond James, the IFA community is closer than ever to reaching an agreed protocol on client ownership.

However, despite the progress, challenges remain to reaching a set of principals that would both give clients the freedom to choose their adviser and protect firms against losing clients and assets.

In February 2012 a judge ruled against Towry after it sued Raymond James and seven advisers which it alleged had solicited clients.

While the ruling spurred the profession into action, with the Tax Incentivised Savings Association (Tisa) forming a committee aimed at reaching an agreed protocol on client ownership, it also highlighted the need for firms to have watertight adviser contracts.

Conflicting challenges

This conflict is at the heart of current Tisa discussions, and reflects the profession-wide clash between the greater transparency and client-centricity brought about by the retail distribution review (RDR) and firms’ need to retain advisers, clients and assets to boost all-important recurring revenues.

Robert Campbell (pictured above), partner at solicitor firm Faegre Baker Daniels, who represented Raymond James against Towry, said an ideal protocol would introduce a period in which a client can be contacted by an adviser leaving a firm and by the firm itself, and allow them to choose which to have as their adviser.

‘This is a move toward something that’s in the client interest because it causes both [the departing adviser and their old firm] to be as frank and transparent with the client as they possibly can be,’ said Campbell.

This would result in better outcomes for clients because IFAs would advise clients for the long term, in the knowledge they could take them with them if they moved firms, he said.

‘There would undoubtedly be more transparency. The client needs to know what they’re paying for, what they’re getting and what’s motivating the guy that’s advising them. If someone is at a firm where he knows his relationship will be severed [if he leaves], inevitably the longer-term interests of the relationship with the client are not going to be as prominent’ he said.

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