SRA CONSULTATION ON CHANGES TO FINANCIAL ADVISER REFERRALS

This article examines the SRA’s consultation on changes to your code of conduct and how this will impact on how you can continue to give referrals to financial advisers after the Retail Distribution review takes effect from January 2013. The current approach of your code of conduct Currently, you are required to give investment referrals to financial advisers who can demonstrate an independent approach.  At the moment this means giving referrals to Independent Financial Advisers (IFAs).  The current code has been criticised given that the terms it uses are out of date, and that it does not allow you to exercise judgement on whether an adviser’s services meet the needs of your clients. We actually go further than necessary since we are also Certified Financial Planners (CFPs), which is a much higher level of service and qualification than is currently required.  We focus on Financial Planning and Investment Management, which look at the clients’ fundamental financial position rather than simply seeking to find a suitable product. Proposed changes to your code of conduct from 2013 This article is based on the consultation launched by the SRA on 4th July 2012, and responses need to be submitted by 24th August. See here for more information. The changes will take place by the end of the year. The SRA’s preferred option is to expect solicitors to put clients in a position to make an informed choice as to whether they require a financial adviser who is independent or restricted, the firm’s relationship to that adviser and other pertinent information. This will mean that the lawyer must make the client more involved in the decision making process and that the client understands the implications of making that decision. This could be seen as a relaxation of the current rules since this would appear to suggest that you are no longer required to recommend financial advisers who are independent.  In some ways the proposals put more onus on you to prove that the clients’ needs are being met by your referral. We would argue that our service goes beyond the requirements of independence given that we offer a much more holistic approach. We also believe that it is more important to align your services with a firm which meets your professional ethos and offers services of genuine use to the needs of your clients.  Surely this goes beyond which products are recommended? The retail distribution review – what you need to know

  • Financial advisers will be required to have a higher level of qualification We are already far in advance of the required level.
  • Financial advisers must agree their remuneration with clients We already meet the requirements, and have done so for 5 years.
  • Clearer definition between independent and restricted advisers Essentially advisers must be independent or restricted. We will remain independent.
  • Higher professional standards This is to be applauded, and we already meet the standards required through our membership of the Institute of Financial Planning.

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Dan Woodruff

Certified Financial Planner & Chartered Wealth Manager at Woodruff Financial Planning
Financial Planning helps you to navigate and anticipate significant life changes. I want to help you to ensure your money is managed wisely to give you the financial security that will fund the future and lifestyle that is important to you.

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