I’m referring to new rules, being introduced by The Solicitors Regulation Authority (SRA), which will change the way financial advisers and planners work with solicitors. If implemented they will have far-reaching consequences which those of you who work with solicitors need to prepare for.
In my experience, most relationships between solicitors and advisers are relatively informal.
Introductions are often made from an individual solicitor to an individual adviser. It’s common that in a multi-partner practice, each solicitor will introduce to advisers in different firms.
It’s also true that despite the best of intentions at the outset, introducer agreements between advisers and solicitors often wither on the vine. That’s often down to time pressures, but also, perhaps, because the arrangements aren’t more formal; if they were, there’s an argument to say they might be more successful.
That’s one for another day though.
Back to the new rules, which will put an end to these ‘every man for himself’ deals. As SIFA put it in their excellent recent briefing note: “This [the new rules] represents an important departure because it encourages solicitors to adopt a corporate mentality and to move away from the ‘confederation of sole practitioners’ syndrome which militates against the organisation of law firms on a commercial basis.”
Firstly, the new rules, will mean that referrals between advisers and solicitors will need to be made under a formal introducer agreement. Consequently, a legal practice with multiple partners, each introducing to different advisers, will need several introducer agreements.
Secondly, the referring solicitor will need to have completed in-depth due diligence on each adviser the practice is introducing to.
Finally, the new rules may make it simpler for agreements to be arranged on commercial terms, with the solicitor receiving a fair level of remuneration for introductions he or she has made. More of that in another blog though.
For the time being, advisers and solicitors have time to prepare; the new rules aren’t expected to come in to force until Autumn 2018. That doesn’t mean you should waste time though, the implications for the relationships between solicitors and advisers are immense; you could call this a game-changer!
I welcome the news that relationships between advisers and solicitors are to be put onto a more formal footing. However, the obvious consequence is that solicitors, perhaps hard pressed for time and resources, will be unlikely to put multiple introducer agreements in place. In my view, there is a distinct possibility they will take a more centralised approach and agree to refer, at a practice level to one, maybe two advisers.
There’s potentially a further implication too, which could be good news for independent advisers.
The Law Society makes a strong recommendation that solicitors should only refer their clients to advisers who can provide conflict free advice. With the additional due diligence that the new rules are likely to mean, could this lead to a situation where solicitors no longer refer to restricted advisers? Remember too, that solicitors have an obligation to refer clients to an adviser that the clients are in a position to make an informed decision that the referral will be in their best interests.
I have no doubt that these rule changes will transform the way solicitors and advisers work together. If this is a market you are in I would therefore suggest you:
Start thinking about how the new rules will affect those relationships
Talk to your solicitor contacts and introducers now, most advisers won’t know about these new rules, you now (if you didn’t before) do. Explaining them through with your legal contacts, and starting to plan for their implementation, can only strengthen your position
Being proactive will also mean you are at the front of the queue if multi-partner firms look to take more centralised decisions and slim down the group of advisers they work with
Don’t just talk to solicitors you are already working with. Why not use the new rules as a way of rekindling relationships which have, perhaps, grown a little tired? Or as a door opener to new firms?