Estate Planning Guide

Steps to building a relationship with a financial advisory firm 101 100 PROFESSIONAL CONNECTIONS PROFESSIONAL CONNECTIONS Key considerations IDENTIFYING DEMAND Identify what complementary specialisms your clients need. You may also consider training and educational opportunities that might be available through financial advisory and planning firms. FINDING THE RIGHT FINANCIAL ADVISORY OR PLANNING FIRM • Look for firms that understand the regulatory and ethical responsibilities you have to the client, and identify those who will work in a collaborative and transparent way. Your values and objectives should be shared by financial advisory or planning firm and you must trust each other, particularly in relation to looking after clients and achieving their goals. • Skills in building relationships are important – both in terms of the relationship between the firms and with clients. • Parties who can provide good joint marketing and business planning skills (as possibly demonstrated within their own financial advice/planning business) are attractive as they can bring those skills to your firm. • A decent sized client base (built rather than acquired) could be evidence of good ability to drive business development. ASSESSING POTENTIAL PARTNER IFA FIRMS • Implement a standard procedure administered by the Compliance Officer 4.3 for Legal Practice (COLP) at a legal firm or person fulfilling a similar function at an accountancy firm. But it should keep pace with any changes in the market and changing needs of clients and your company – so due diligence questions may evolve. • Document outcomes, including justification of how and why the final decision is reached. This should reduce both reputational and financial risk in the event of future issues. DUE DILIGENCE Due diligence on the financial adviser include: • the level of qualifications/accreditations of the firm’s team, e.g. SIFA, SOLLA, STEP • the service they provide - a full financial planning service or a transactional based service • their policies and procedures – are they consistent with the Institute of Financial Planning’s Code of Ethics & Practice Standards (for accountancy firms) or the SRA’s Code of Conduct (for legal firms) • the clarity, consistency and transparency of their fees and charges • whether their advice is independent or restricted (both can be referred to by accountants and legal firms). AGREEING SERVICES It’s important that it’s clear where the responsibilities lie – who takes the primary responsibility for which part of the work, who does what and how and when it’s going to be delivered. Timescales and reporting are very important. AGREEMENTS • When SRA rules change in Autumn 2018, rather than referrals being made from individuals within the firm, there will be a requirement for formal agreements, in writing and on a firm to firm basis. This will not affect accountants who will be able to continue to make recommendations on a verbal basis, which makes for a more ad hoc relationship and doesn’t necessary encourage centralised due diligence. • Written agreements could take several forms such as Joint Venture (JV) - A relatively cheap and common structure often where there is a 50/50 split in the shares of a new corporate entity, the legal/accountancy firm is an appointed representative of the IFA firm (delegating responsibility for FCA compliance to the IFA firm). Then there is the Alternative Business Structure (ABS) – which is more complicated and expensive to set up and requires regulatory authorisation. • Most law firms will need to have referral agreements with a number of IFA firms, based on the specialist expertise and qualifications of those firms; and Lexcel, the Law Society’s quality standards body, recommends that in this situation a panel should be created and kept under periodic review. REFERRALS • Referrals to third parties with which legal or accountancy firms have a financial connection should be supported by the client’s written consent as a matter of best practice. And, it is a good idea to provide a simple due diligence statement to clients, explaining the qualifications, accreditations, business specialisations and experience of the financial adviser firm and, in particular, whether it is independent or provides advice on a restricted basis. • The rules affecting payments received from financial advisers for referring clients are similar for solicitors and accountants. In both cases, the requirement is that the professional referrer must account to the client and justify retaining the payment. The client must be advised of any commission payments (i.e connected to a specific transaction). • Solicitors in particular should show justification of their fees and that they really are providing a service. This can be done by actively promoting the value of receiving financial advice, by providing financial services marketing material in their reception areas and on their websites and participating in joint seminars. An explanation of the benefits to the client, advising that the remuneration is coming out of the adviser’s pocket, not the client’s, is also useful. INVEST IN THE RELATIONSHIP • Time, and sometimes money, will be required to ensure the relationship really works. This may include training all Partners, fee earners and staff into why the relationship is important and how it will be mutually beneficial. • For accountants, financial planners could be teamed up with a tax or other specialists as financial planning is often a lead service in winning new accountancy business. MONITOR THE RELATIONSHIP Things are unlikely to remain static – either in the legal or accountancy firm or in the financial planning provider. Over time, there may be changes to staff, methods and regulatory fulfilment at the adviser firm, so regular, ongoing reviews of it are vital.