What due diligence do solicitors need to do to refer clients?

Category: General

Proposed rules mean solicitors must increase their due diligence on whoever they refer to. So, what does this mean for law firms?

The Solicitors Regulation Authority (SRA) urges firms to have a holistic picture of their client’s needs. Part of this is having formal relationships with financial planners such as ourselves.

There are clear links between financial planning and legal services. This is especially true within private client teams offering estate planning services. The changes to pensions alone affect a variety of areas solicitors advise on.

We work with clients and their solicitors, creating plans which help them achieve their goals. Part of this is ensuring taxes are minimised. Another is ensuring any invested money works as hard as possible.

We forge ongoing relationships with their clients. Working with us helps reduce any reliance on transactional business.

What are the current SRA regulations?

The SRA Code of Conduct states referrals should be in the clients best interests. Clients should be able to make informed decisions about whether this is the case.

Clearly, solicitors need to conduct due diligence on whoever they refer to. The new SRA Code also states written agreements should support any referral arrangements where a fee-sharing arrangement is in place.

Currently, most arrangements for the referral of clients for financial advice are informal. Often, firms allow individuals whoever they want without any due diligence. Such an approach could result in a proliferation of referral agreements within firms. Each would need to be compliant with the SRA Code.

A single, firm-level, agreement could lead to a more centralised approach.

What does this Due diligence involve?

The starting point for anyone wanting to refer clients to us is to ensure we are reputable and competent. They also need to see whether our services are compatible.

Freedom from the influence of the providers of financial products is essential. The Law Society has recommended solicitors should only refer clients to independent firms. We are such a firm.

How can you help with the due diligence process?

We have compiled a due diligence pack as well as a standard referral agreement. Both of these are available upfront. This takes hard work away from individual law firms.

Would you like to know more about how we can reduce the work involved in referring clients? Feel free to get in touch.

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