Solicitor firms are increasingly responding to the market forces unleashed by the Legal Services Act by setting up joint ventures with financial advisers, the Gazette has learned.
The SRA announced more than a year ago it would liberalise the rules that prevented law firms referring clients to advisers tied into offering certain financial products. However, the group representing independent providers said firms have heeded the Law Society’s advice to continue to confine client referrals to its members.
In addition, there is growing interest in joint ventures, which permit solicitors to receive dividend income but to delegate financial services compliance to IFA partners. It is understood that around 20 joint ventures have been created this year.
Ian Muirhead (pictured), director of Solicitors Independent Financial Advice (SIFA), said the main effect of the rule change has been to make firms more discriminating in their choice of financial advisers, because new SRA rules require due diligence to demonstrate that referrals are in clients’ best interests.
Muirhead said: ‘A major advantage of the JV over an arms-length referral is that closer association enables solicitors to provide a more holistic client service without having to get into the complications and cost of ABSs.
‘We’re getting enquiries about it all the time. It’s taking off in a big way.’
The presence of compliance officers for legal practice has also encouraged firms to conduct due diligence on financial advisers centrally, rather than letting individual members of the firm take their own decisions.
Nick Evans, partner at Brighton firm Griffith Smith Farrington Webb, which has joined with IFA North Laine Financial Management, said: ‘We see the JV as a crucially important part of the future development of the law firm.’