SRA rule change will increase choice but harm consumer
Choice is a wonderful thing. Living near Olympic Park I can currently choose between looking at adverts for Coke or McDonalds.
Neither is likely, I imagine, to boost my chances of qualification for the 2016 Games. But what if increased choice means increased access to harmful options? Am I empowered by choice or being lead blindly into a minefield of fraught alternatives?
Currently, on a visit to a solicitor, choice is severely restricted. If clients need to be referred for financial advice (and those awarded damages, arranging mortgages or requiring after-the-event insurance usually are), the solicitor must pass clients on to an independent financial adviser. To me it’s a system that ensures impartiality and choice, but is seemingly not good enough for the Solicitors Regulation Authority.
This week it was confirmed that the regulator is consulting on scrapping the rule preventing lawyers from referring clients to advisers contracted to selling the products of one or more provider. A consultation it may be, but the noises are all suggesting this is a done deal.
As an SRA spokesman told us this week: ‘We believe solicitors, as highly qualified professionals, should have the freedom to assess the need and discuss this with the client, not be restricted by a prescriptive rule.’ Hardly screams ‘open mind’, does it. This is a measure driven by choice that will ultimately harm the freedom of the consumer.
In what possible regard will it be to the client’s advantage to be referred to an adviser with an ulterior motive? An adviser, lest we forget, who benefits from willfully ignoring any product that does not line their own pocket. That’s not freedom, that’s a legitimised cartel.
And what of the solicitor’s code of conduct? Mandatory principles insist on a proper standard of service and for lawyers to act in the best interests of their client. How exactly are these principles served by referring clients onto advisers on the take?
After washing its hands of the trainee minimum salary in May, the SRA continues its curious mission to deregulate aspects that are actually of some use.
As consumers we want independent, impartial advice - not to be railroaded into decisions that might not be in our best interest. If the SRA wants to give me choice, I’ll happily choose the status quo, thanks very much.
Follow John on Twitter
Comments
The SRA really are clueless.
The SRA really are clueless. The next thing that will happen is that people with have tie ups with the likes of Barclays. Elderly widows will be stitched up with every unsuitable product imaginable from PPI to 20 year investment plans.
THE CASE FOR INDEPENDENT ADVICE
This whole issue really makes my blood boil!
Surely, the key issue here is all about how a non-FSA regulated Solicitor can decide which range of products the Client will be offered and which range of products they won't be offered? By definition a "Restricted Adviser" will not be offering a whole of market proposition, so what happens to the Client if the very thing they need is the bit of the market not covered by the recommended Adviser? Could the Solicitor be liable for the gap in the Client's financial plan?
The SRA would do well to learn the lessons of the Equitable Life debacle. Admittedly, Accountants were the main culprits rather than Solicitors, but the principle is the same; Clients were referred to a Tied Adviser for mainly pension advice simply because there was supposedly no commission payable. The fact that Equitable Life Advisers were the best paid in the industry seemed to escape attention; what did Accountants think was the remuneration model?! No real due diligence was done on Equitable Life, its financial wellbeing or the quality of it's offering, it was just supposedly cheap.
The belly-aching from folk who expect to be Restricted Advisers post-01/01/2013 should be ignored; the loss of referrals from Professional Connections is just one of the many factors to be weighed-up when the decision is made to go Independent or Restricted, surely?
Restricted may not always mean restricted !
Independent no longer necessarily means that you can offer a whole of market service for products - it means that the firm can advise on the full range of FSA stipulated packaged products and this status no longer has anything to do with whether or not the adviser is tied or whole of market. It is the IDD/Key Facts that inform clients whether the 'Independent' or 'Restricted' advice is tied or whole of market - how confusing is that for the general public???
What about a firm that purely does investment management? Such firms specialise in portfolio management but because they will not also advise on 'packaged products' post RDR then they are forced to call themselves restricted - this is misleading. Just because they specialise in investments and do not advise on pensions are they no longer independent? Of course they are - they still have access to the whole of the market for the securities, funds etc that they include in their service.
So, if a Solicitor's client has a sum they wish to invest why not send them to a 'restricted' firm - that is a firm that specialises in investment management. The quality of their advice & service will be no less just because they 'specialise' in the very service that the client requires but because of their inability to also throw in pension advice they are 'restricted'.
Independent no longer means whole of market/not tied - it simply means that the firm does not offer advice on all the products stipulated by the FSA. Just because a firm is 'restricted' does not mean it's advisers are ''on the take'' and I take offence to that statement - and I work in a firm that will be 'Independent' post RDR.
'Restricted' does not mean dishonest, less skilled etc - it means that the firm does not offer the full range of products but that in itself may not be a bad thing if the firm 'specialises' in certain areas such as pensions, investment management etc.