According to several IFA firms, solicitors already regularly refer business to non-independent rivals and frequently fail to ensure the adviser they are referring to is independent, despite requirements to the contrary by the SRA code.
One senior figure at a national product provider said: “There are some ‘tied’ advisers who appear to receive significant numbers of referrals from professionals, which some commentators have found surprising.”
John Bloomfield, independent financial adviser at Paul Wilson Financial Services, said solicitors will have “no real choice” but to refer to restricted advisers post-RDR as there will be a drop in ‘independent’ advisers, but he added that many already refer to non-independent firms.
In particular, Mr Bloomfield said he knew “lots of people” that refer to St James’s Place.
He said: “I have been an adviser since 2005 and no solicitor has ever checked that I am independent or asked me to confirm it in writing.
“All the SRA is doing is facing up to the situation - they just make referrals to who they trust.
“The majority don’t care if they are independent or not. The only reason that some of them care is that the rules say they should.”
Last month (1 June), Addidi Wealth director Anna Sofat similarly told FTAdviser that referrals to non-independent firms is widespread, also giving the example of St James’s Place.
Ms Sofat argued that for a solicitor to direct a client to a non-independent advice firm is akin to giving regulated advice when unqualified to do so.
Many commentators argued that the onus is on solicitors to determine if the advice firms are independent and that financial advice firms are not required to turn away referral business even if it could be contravening the SRA handbook.
St James’s Place refused to comment on whether it accepted referrals from solicitors.
Commenting on the SRA proposals, chief executive David Bellamy said: “We welcome the consultation by the SRA as we believe outcomes-focused regulation is right for both business and consumers.
“One of the clear benefits of the Retail Distribution Review is that it ensures a higher minimum standard of professional qualification across the industry.
“The improved professional standing of all financial advisers should allow the focus to shift away from the status of the adviser, to the thing that matters most for clients: the quality of the advice that they receive.”
Gillian Cardy, managing director of trade body IFA Centre, said the rules change is essentially catching up with the existing status quo.
She said: “They have been saying for a long time that they wanted to change the rules. The reason they wanted to change them isn’t necessarily to damage IFAs, but that they refer their business to stock brokers and wealth managers.
“Up until now we have had a reasonably clear view that solicitors in most cases should be referring their clients to IFAs, but once they have weakened their position it’s going to be quite difficult for the SRA to decide which bit of restricted they are OK with.”
Steven Cameron, head of regulatory strategy at Aegon, said: “I hope other equivalent bodies will engage with this process to reach an informed decision for their members.”
