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View the article online at http://citywire.co.uk/wealth-manager/article/a637340

SRA poised to allow restricted referrals post-RDR

by Danielle Levy on Nov 26, 2012 at 16:42

SRA poised to allow restricted referrals post-RDR

The Solicitors Regulation Authority (SRA) is recommending to its board that solicitors should be allowed to refer clients to any financial adviser or wealth manager regardless of whether they are restricted or independent after the retail distribution review (RDR).

The recommendation by the body comes ahead of its board meeting on Wednesday 28 November, where members will be asked to decide whether solicitors should be able to refer business to restricted advisers and wealth managers post-RDR. In light of this, the body said officers are recommending that the Code of Conduct's Outcome (6.3) which allows solicitors to put clients 'in a position to make informed decisions about referrals in respect of investment advice' should be amended. This will follow the introduction of the RDR, which will change the underlying definitions and criteria for firms seeking to make the independent standard.

The move will be welcomed by a number of wealth management firms, which will take on the restricted label post-RDR as they do not advise on life products and pensions, or have in-house fund ranges. Having launched a consultation on the issue, which ended in September, the SRA said it needed to ensure that best outcomes for clients are achieved. It said there was a risk that only allowing solicitors to refer to those advisers deemed 'independent' might be contrary to that aim and after analysing responses, the authority will advise the board to move to the preferred option, option 3, as listed in the consultation document.

They said the benefits of backing this option include supporting outcomes-focused regulation, alongside reflecting the possibility that under the new FSA regime, many firms currently described as independent may not be able to label their advice as independent because they will not advise on a sufficiently broad product range. To refer business on to a restricted adviser, the lawyer must ensure the client understands the implications of this recommendation and is involved in the decision-making process.

Agnieszka Scott, SRA director of policy, said: 'We had an excellent response to our consultation and we'd like to thank all those who responded. We've taken on board the comments received, some of which have given us food for thought.

'However, nothing has changed us from our belief that the best way forward is to implement our preferred option, option 3, and that's what we'll be recommending to the board. This represents the best fit with outcomes-focused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss clients' needs, not be restricted by a prescriptive rule.'

Back in October, the Institute of Chartered Accountants for England and Wales (ICAEW) said accountants could refer clients to ‘restricted’ advisers after the RDR. Following a review, the professional body decided to retain its existing code of ethics, but tweaked its definitions of restricted and independent to better reflect the FSA’s terminology and said those advisers classed as restricted should be assessed on a case-by-case basis.

2 comments so far. Why not have your say?

John Eaton

Nov 27, 2012 at 10:06

What a farce this predictable and pre-determined outcome makes of the previous consultation. How can the ability to refer Clients to sales-driven and product-promoting advisers possibility be in the best interests of Clients? This flies in the face of both common sense and all previous experience. It is interesting that the response of the Board to all the very valid and weighty objections received from so many individuals with real experience of the issues is simply a grudging admission that "some [of those responses] have given us food for thought" - with no attempt actually to describe either the food or the thought, let alone to provide an answer to those objections.

Let's only hope that the Board will listen to the reasoned and experienced arguments in favour of retaining the present rule (allowing referrals only to truly independent advisers) rather than the apparent recommendation of the officials, which is fraught with danger and the certainty of future mis-selling claims.

But what would we know? We only have the benefit of experience, previous history and the opinions of our Clients to rely on - so let's throw open the doors to the vested interests and undue pressures, and create more jobs for the FSCS in due course.

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paul beasley

Nov 27, 2012 at 16:49

This is the only sensible decision the board could take. How can anyone argue a pensions GP is better placed to give advice than a pensions consultant? Independence was merely the starting point for solicitors to narrow the options. They still had to delve into the skills and experience of each firm. Now they will simply have a more difficult and time consuming task of sifting the wheat from the chaff. A great example of how not to protect consumers...brilliant work by those wonderful high fliers at the FSA!!

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