SRA presses on with change in financial advice rules

The SRA will recommend to tomorrow's board meeting that the traditional requirement on solicitors to refer clients wanting financial advice to 'independent intermediaries' should disappear.

Instead the regulator would change its rules so that solicitors put clients 'in a position to make informed decisions about referrals'.

The move was triggered by the FSA's decision to change its definition of 'independent advice' at the end of this year.

To qualify as 'independent', the FSA wants firms to consider a broader range of products, not just 'packaged products' but structured investment products, all investment trusts and unregulated collective investment schemes.

A spokesman for the regulator said there was a risk that if solicitors referred clients only to advisers deemed 'independent' they might not achieve the best outcome.

A consultation on the issue closed in September, with the SRA maintaining its original position on the best way forward.

Anieszka Scott, director of policy at the SRA, said the consultation had provided 'food for thought' but had not changed the organisation's belief on the best way forward.

'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,' she said.

The SRA is recommending that outcome 6.3 of the SRA Code of Conduct 2011 should be amended so that clients are in a position to make 'informed decisions' about referrals.

Alternative options would have involved removing outcome 6.3 from the code of conduct and replacing it with a new 'indicative behaviour' or keeping outcome 6.3 but revising the language to bring it into line with the FSA's new definitions.

Scott said the chosen option would reflect the possibility that under the new FSA regime, many firms currently described as independent advisers may no longer be able to describe their advice as independent.

She added that the proposal would remove restrictions on customer choice, where customers wanted to access financial advice through a solicitor.