Estate Planning Guide

KARON WALTON CHIEF LEGAL OFFICER, SOLICITORS FOR THE ELDERLY Autumn 2018 is set to see the implementation of new a raft of changes to the Solicitors Regulation Authority’s (SRA) Handbook which sets out the standards and requirements expected of UK legal professionals. One new requirement is that these professionals must base referrals on written agreements. Those that have concerns about this having a detrimental effect on solicitors and financial advisers working together to provide joined up services for clients should consider the pre-existing procedures of reputable firms; certainly, when I was in private practise, we always had a due diligence requirement with Independent Financial Advisors (IFAs), even we didn’t have a written agreement. We did a lot of research on them and how they operated, including their charging rates, conduct and evidence of qualifications and experience. The importance of this is heightened when dealing with the Court of Protection or the Office of the Public Guardian (OPG). This is a fairly regular occurrence with elderly clients and, in these instances, specific standards apply to who solicitors make referrals to. We would expect our members to do proper due diligence on whoever they refer work to and they work closely with advisers who are members of the Society of Later Life Advisers (SOLLA). They are required to achieve an accreditation to qualify for SOLLA membership, so we already know that these IFAs are of a certain standard, with a tested level of knowledge. From an SFE point of view, the introduction of written referral agreements isn’t going to make a huge difference to our members, but it is a positive development. It will tighten up the procedures across all firms and a formal agreement will require the consideration and commitment of the firm rather than individual partners. Nevertheless, in spite of the push by the SRA and the government for the last 10 years to try to engender better service to consumers, my view is that separate organisations still tend to be quite insular. Third party relationships tend to be ad hoc as this gives the freedom to select the right person to do each particular piece of work rather than be tied to one particular partner. A tied relationship could raise issues with the OPG which requires an element of choice and independence in certain decisions taken for third parties; just as the OPG expects legal representatives to get three valuations, if they were putting a house on the market, they would still expect the representative to look at who the appropriate potential service providers are when appointing a financial advisory firm. Although the culture of individual solicitors taking their own personal decisions about referrals will need to change; having a central point of contact, such as the compliance manager, taking ownership of referral agreements would seem sensible. They would then ensure that relevant organisations, including IFA firms, are on a list of preferred referees, and that sufficient due diligence has been done. AUTUMN 2018 SRA RULE CHANGES: HOW THE REQUIREMENT TO BASE REFERRALS ON WRITTEN AGREEMENTS WILL AFFECT SOLICITORS AND THEIR RELATIONSHIPS WITH IFAS Thought Leadership https://sfe.legal 103 PROFESSIONAL CONNECTIONS 102 PROFESSIONAL CONNECTIONS Developing a financial advice position CASE STUDY Over a decade ago, Thomas Westcott Chartered Accountants partnership established its wholly owned subsidiary company - Thomas Westcott Chartered Financial Planners (the trading name of Thomas Westcott Financial Management Limited). Sheldon Cole, a tax partner at the firm, says, “I’ve always worked closely with financial planners and one of the reasons I came over to Thomas Westcott was because a previous colleague of mine, a financial planner I’ve had a long working relationship with, had recently moved to the company.” Cole recognises the value of working closely with financial advisers and Thomas Westcott Chartered Accountants (TWCA) shares some of the Directors of Thomas Westcott Financial Management Limited (TWFM), giving each firm a vested interest in the success of the other. TWFM is directly regulated by the Financial Conduct Authority and while the Designated Professional Body status of TWCA allows it to discuss the various options on certain transactions, there are very clear boundaries Sheldon Cole Partner, Thomas Westcott Chartered Accountants separating the activities of the two firms. Cole states, “A client might ask, when should I sell these shares? But I can’t tell him that. I can tell him what the CGT or other implications of selling the shares are, but I’d say you need to take financial advice and that’s where TWFM comes in.” In fact, there’s a lot of cross-referral going on throughout the two firms on a daily basis; in terms of TWFM, the estimate is that about 40% of new business comes from TWCA. TWCA also receives referrals from TWFM, however, the financial advisory business is more of an income stream for the overall group than it is a referrals generator for the accountancy practice, although that does work as well. Cole’s thoughts on the benefits of the arrangement are that, not only does it provide joined up advice, but “it makes sense that we’re working with colleagues that we know and trust who are accessible to us. And our financial advisory firm gives fee-based, totally independent whole-of-market advice on the financial planning side, with no networks involved, no restrictions, all consultants salaried, so not on bonuses or commission, so it’s not a sales pitch to get work. This means the financial planners have a similar ethos to the accountants and they’re not pushing products, they’re looking to deliver good advice and to ‘add value’.” Being comfortable with the people to whom you are referring your own clients is key for Cole, “because our reputation as a firm and our reputation as partners is on the line.” Cole’s view is that a lot of clients now expect this integrated service offering and this is particularly true for clients of larger firms. The rationale for Cole is that it helps to manage risks and clients understand that and its value. He explains, “for example, if TWFM is advising something on the financial planning side and I say that could cause a problem from a tax perspective, we can have that discussion with a client and consider alternatives.