Solicitors are to be allowed to refer clients onto any financial adviser, regardless of whether they are independent or not.
The Solicitors Regulation Authority is set this week to relax the rule insisting lawyers’ clients can be referred only to independent advisers.
Instead, solicitors will be permitted to send legal services consumers to advisers who may be tied into offering a particular financial product.
Independent advisers condemned the decision as putting solicitors in danger of mis-selling claims.
Ian Muirhead (pictured), chairman of Solicitors Independent Financial Advice (SIFA), said: ‘It is unfortunate that solicitors, who are in no position to distinguish between the respective merits of different categories of financial adviser, are to be subjected to approaches by those whose advice is conflicted by self-interest.
‘In our view there is a substantial risk that the reputation of individual firms and of the profession as a whole will suffer as a result, and that the claims for mis-selling which are repeatedly hitting the Financial Services Compensation Scheme will in future also be directed against the solicitors’ compensation fund.
‘It is to be hoped that even at this late stage the SRA board might draw back from the brink of a potentially unfortunate decision.’
The SRA held a two-month consultation earlier this year but has admitted the responses did not to change its original position to change the current regulation.
Agnieszka Scott, SRA director of policy, said: ‘We have taken on board the comments received, some of which have given us food for thought. However, nothing has changed us from our belief that the best way forward is to implement our preferred option.
‘This represents the best fit with outcomes-focused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss clients' needs, not be restricted by a prescriptive rule.’
An SRA spokesman declined to say how many consultation responses were actually in favour of a rule change. It is likely that information will not be published until January.
Critics have warned that allowing solicitors to refer clients to financial advisers with a vested interest will be a risk to both the consumer and the profession.
In its consultation response, the Law Society warned of a ‘clear risk’ to solicitors who will be expected to advise clients on the best course of action and then face negligence claims if the financial advice is wrong.
The SRA will recommend a rule change to its board when members meet on Wednesday. Officers have recommended amending the Code of Conduct's Outcome (6.3) allowing solicitors to put clients ‘in a position to make informed decisions about referrals in respect of investment advice’.
Financial Services Authority regulations on advisers are due to change at the end of the year and the SRA Code needs to change at the same time.
Photograph courtesy of Citywire