Saracens Blog

Do financial law services permit a solicitor to offer financial or investment advice?

Law firms must always act in the best interests of their clients. This means solicitors must refer their clients to independent financial advisors for investment advice. All forms of investment in the UK are now regulated by the FSA or Financial Services Authority.

The Financial Law Services Act 1988 intended to improve the quality of financial and investment advice given to the clients to reduce the chance of losing money thorough fraud, poor advice or incompetence by an agent or investment advisor.

Solicitors may give generic advice to their clients with regards to investments. If solicitors refer their client’s to multi-tied or tied advisors with regards to non-investment products, then this is not a breach of the Solicitors Code of Conduct.

Non investment products could be one of the following:

  • General insurance agreements and/or contracts,
  • Protection contracts, and
  • Regulated mortgage contracts

In addition to the above, solicitors are able under Part 20 exemption regime to provide certain ‘regulated activities’ if these are incidental to the provision of professional services. ( these could only be provided by FSA-authorised firms.) Thus, non-FSA-authorised solicitors can only advise on: decisions to sell or not sell existing investments; the mix of existing investments; the appointment or approval of fund managers; and any other decision that does not concern the acquisition of a particular investment.

However, when clients require advice on investment that could rise or fall in value, such as; an endowment policy, life insurance with an investment element, or a pension policy, then rule 9.03(6) of the Solicitors’ Code of Conduct 2007 (the Code) states that clients must only be referred to independent intermediaries advisors who are authorised to give investment advice on products from across the whole market and offer clients the option to pay fees. Financial advisors, who do not offer the option of paying fees, can not call themselves independent advisors.

Solicitors should identify their clients’ needs and must ensure that they comply with the other provisions of rule 9.03rule 1 and rule 19 of the Solicitors Code of Conduct

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