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SRA referrals move fails to address holistic planning needs

Advisers warn referring business to non-independent firms cold result in a conflict of interest for solicitors.

By Michael Trudeau | Published Dec 06, 2012 | comments

A consultation launched by the Solicitors Regulation Authority to move away from a requirement to refer to only independent advisers, which was last week approved by the SRA board, fails to address the need to ensure refers are not merely product focused, according to one IFA.

Responding to the news that the board had approved restricted referrals, some commentators have argued that advisers who are restricted to a certain type of product can still give unbiased advice on that product and therefore not put referred clients at a disadvantage.

However, Kusal Ariyawansa, chartered and certified financial planner at Appleton Gerrard Private Wealth Management, argues that clients will benefit from the holistic financial planning approach only independent financial advisers will be able to offer post-RDR.

He said that restricted “specialists” could be used, but that they should have to work with an independent adviser to ensure the product does not compromise the client’s overall financial planning needs.

He said: “Where issues will arise is, where financial planning is concerned, no one area can be independent of your overall financial plan. This means that each addressed need affects other needs which must all be equated to balance the equation.

“This can only be done by an independent adviser with no restriction or bias. Now that could potentially see an independent certified financial planner working with a pensions specialist who is restricted. The specialist can get the referral to do the work but should then work together with a CFP to ensure the financial plan is rounded off.

“The sooner other professions realise that the key driver to all of this is financial planning, the sooner we’ll get over this concept of always having to refer cases based around product.”

Scott Gallacher, director of IFA Rowley Turton, said: “Solicitors are unlikely to have the skills or knowledge to accurately assess whether or not restricted advisers would be able to offer the correct advice or range of products for their clients.

“Consequently solicitors recommending restricted run the danger of future complaints should the restricted adviser’s advice turn out to be less than satisfactory.”

Rosemary Heaversedge, principal of Shropshire Independent Financial Services, warned that referring to non-independent advisers could result in a conflict of interest.

She said: “If a client holds a selection of perfectly good investments, both collective and/or investment bonds, which do not fall into the prescribed panel of the non-independent adviser, the adviser will not be able to advise on them but is likely to switch them into a similar product on their panel.

“This will incur charges for the clients and they risk being ‘churned’ out of perfectly good products for the sole reason that the products are not on the restricted panel.”

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