With conveyancers being pressured on every side, Allan Carton of inpractice has reminded firms about the opportunities that will arise over the coming months from providing services that aren’t legal but are linked to the legal services sector.
Explaining that the number of law firms providing in-house financial services in England and Wales has dwindled to fewer than 50, and there are a similar number in Scotland. He points out that the main reasons for this decline are as follows:
– Firms have failed to integrate financial services as a mainstream activity
– Firms have been intimidated by the robust regulatory approach of the FSA
– Solicitors have failed to appreciate how financial advice can complement their services
– Solicitors have looked down on financial advisers as non-professional.
Allan points out that the Legal Services Act is causing firms to consider ways of developing their client proposition in anticipation of increased competition, and there is widespread interest in developing business relationships with firms of financial advisers.
He goes on to explain that fortuitously, efforts by the FSA to increase professionalism among financial advisers have resulted in the emergence of an elite tier of fee-based and highly qualified IFAs who are poised to enter the professional community.
He advises that there are essentially two forms of association between solicitors and IFAs:
– The traditional client referral relationship, though in the light of the robust approach now being taken by the SRA in relation to the need to account to clients for shared commissions, referrals are now commonly unremunerated and solicitors’ motivation is the wish to provide a complementary service and to ensure that the client receives high quality advice.
– Joint ventures, in the form of jointly-owned companies or LLPs which are managed by the financial advisers, who also assume responsibility for FSA compliance, and from which the solicitors are able to draw a dividend provided that the JV is fee-based.
Allan points out that SIFA is an independent organisation run by a solicitor and two senior ex-Law Society executives, whose purpose is to facilitate relations between solicitors and financial advisers. Its directory of professional financial advisers www.sifa-directory.info
is endorsed by the Law Society and accessible via the Law Society web site. SIFA provides training and compliance services and produces a range of technical handbooks addressing the common ground between legal and financial advice in areas such as trust investment, Court of Protection work, older client affairs and pensions and divorce. It has produced a joint venture documentation kit in conjunction with DWF LLP Solicitors and its handbook Financial Services for Solicitors is published by the Law Society.
SIFA conducts regular seminars for solicitors on the Legal Services Act and financial services matters and has assisted in establishing many referral and JV relationships.
Whilst Allan and inpractice advise firms on joint ventures with IFAs it is clear that there are many ways in which the market will continue to develop and evolve as ownership rules change.
Allan Carton is a consultant at with Inpractice. www.inpractice.co.uk