Legal News
Liberalising IFA referrals would risk Solicitors who would be vulnerable to negligence claims (25 September 2012)
Date: 25/09/2012
Negligence claims could put solicitors in vulnerable position if clients were referred to financial advisers who are not wholly independent the Law Society has warned.
Following the consultation on financial advice by Solicitors Regulation Authority (SRA) the Society responded by pointing out the danger of actions alleging poor advice arising from such a referral.
The SRA’s preferred option, to allow solicitors to refer their clients to advisers who may be tied into a financial product, presented a clear risk to the profession, the response by the society added.
Instead, the Law Society was in favour of preserving the current rule that clients must only be referred to a recognised, wholly independent financial adviser.
If the rule was removed then clients and solicitors would have to make informed choices about referrals when neither party was necessarily best placed to make such decisions, the Society said.
In reality, in most cases, the obligation would be firmly on the solicitor to advise as to the best course of action from the information available whether or not they are sufficiently equipped to do so.
Changing the rules would put both the parties at risk as it is unnecessary to provide other options available.
The SRA has argued that a less prescriptive approach would be more consistent with outcomes-focused regulation. Its stance was that solicitors should have the freedom to assess the needs of each client and discuss their options.
However, the Society said this was an area that requires regulation to protect clients. It also questioned the need for change, as inadequate or negligent advice from independent advisers was not supported by evidence.
The consultation closed earlier this month and a decision was expected later in the autumn.