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SRA poised to allow restricted referrals post-RDR
by Danielle Levy on Nov 26, 2012 at 16:42
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.
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