According to Citywire, the Law Society is currently reviewing whether its members are allowed to make any client referrals to restricted financial advisers.
Since the implementation of the Retail Distribution Review (RDR) on 31st December 2012, financial advisers have either been independent or restricted.
Independent financial advice is unbiased and unrestricted, and based on a comprehensive and fair analysis of the relevant market.
This definition is designed to reflect the idea of genuinely independent advice being free from any restrictions that could affect their ability to recommend what is best for the investor.
Restricted financial advice is anything that doesn’t meet this definition of independent financial advice.
What the Law Society appears to be reviewing is a clause in the Financial Services Markets Act Regulated Activities Order 2001.
This clause says says that ‘arranging’ investments is a regulated activity and professionals cannot refer a client, with the intention of arranging investments, to an adviser who is not independent of a product provider.
Of course some restricted financial advisers are independent of product providers. Many are not, and this is where the difficulty arises for solicitors.
When making a referral to any financial adviser, a solicitor must be confident that the adviser is suitable for their clients and they are not inadvertently breaching their own professional rules or the Financial Services Markets Act Regulated Activities Order 2001 when making the referral.
In our view as a firm of Chartered Financial Planners providing independent financial advice, we believe that investors are always best served by independence.
Some restricted advisers are capable of delivering advice which is close to the gold standard of independent financial advice, although for solicitors to be sure they are referring to a ‘good’ restricted adviser is a nearly impossible challenge.
