Financial Services for Solicitors: Law, Practice and Precedents
I n his preface, Ian Muirhead states: ‘This handbook is designed to assist solicitors to identify and take advantage of the business opportunities arising out of financial services work. It considers the regulatory, legal, commercial and marketing issues, and goes on to discuss some of the main areas in which financial advice impacts on solicitors’ mainstream work.’ Overall, I believe this objective is achieved.
The publication is based upon the law as at 5 December 2008 and is, consequently, already out-of-date. For example, reference is made to the new rate applicable to trusts of 45 per cent from tax year 2010/11, but this has already been increased to 50 per cent. Perhaps a loose-leaf approach, rather than a bound volume, would facilitate updates in this rapidly changing marketplace.
The Editor has gathered together a formidable list of co-authors to contribute their undoubted specialist knowledge to this reference work. Whilst I will not list all 19 in this review, I feel I have to mention David Coldrick, who is currently rivalling Dan Brown on my most-read list!
The first and largest single section of the book deals with regulation and structures for financial services and is an ideal source of reference for any solicitor already involved in financial services work or wishing to add that to their armoury. The merits and demerits of everything from the appointment of an independent financial advisor (IFA) as an authorised third party to complex joint ventures are clearly and coherently argued. If I have a criticism in this area, it is that insufficient space has been devoted to analysing the quality of financial advice available. There is almost an Orwellian ‘four legs good, two legs bad’ approach to the differentiation between IFAs and other financial salespeople. While, clearly, solicitors are precluded from dealing with an advisor who offers less than a whole of market approach, the implication that only tied advisors are financial salespeople is misleading. There is a passing reference to the Retail Distribution Review, instigated by the UK watchdog, the Financial Services Authority, in June 2006, which sets out to raise the professional standards in the industry with effect from 1 January 2013. However, there is no acknowledgement that some IFAs are still under-qualified and remain heavily reliant on initial commission from product sales and, consequently, may not be suitable partners for solicitors.
The next section deals with various aspects of tax planning, mainly with reference to inheritance tax (IHT), but also addressing issues relating to expatriates and non-doms. Of necessity, in this brief guide to an enormously complex topic, the tax planning opportunities are only summarised, but will act as a useful reminder to the solicitor of situations in which further advice from a specialist IFA should be sought. In the IHT section, while it was perhaps appropriate to highlight the two most popular planning tools – discounted gift trusts and loan trusts – a note of caution would have been welcomed that any IFA, with no specialist knowledge or qualifications in IHT and/or trusts, can arrange these. The reality is that most of these plans are ‘one-size-fits-all’ and can create as many problems as they solve. Other, more flexible offerings are available to IFAs with the specialist knowledge and qualifications.
The third section of the book deals with trusts, the investment of funds therein and the taxation of the returns generated. Also there is an introduction to personal injury trusts and their important role in financial planning for affected clients; an area of advice, or lack thereof, which I believe will become of increasing interest to the Solicitors Regulatory Authority. Because of the fiduciary nature of the solicitor’s relationship with the client when acting under a power of attorney or as a deputy under the auspices of the Court of Protection, this section contains some useful guidance in these areas as well. Again, this is heavily abridged, but will aid the practitioner who does not deal with these matters on a regular basis.
The remaining two sections of the book deal with family and corporate financial planning, which may not be of great relevance to the trust and estate practitioner. However, I would just like to refer to one aspect of in the family section, namely care fees planning, which rightly highlights the important role an immediate needs annuity can play in funding care fees. However, the article fails to point out that only IFAs holding a specific long term care qualification can advise on such plans.
In conclusion, I would say that this is an extremely useful, if somewhat limited, guide to financial services. Had I not received a complimentary copy to facilitate this review, I would certainly order one for the office library. If, for no other reason, the accompanying CD of precedents is worth the expenditure alone.
Title: Financial Services for Solicitors: Law, Practice and Precedents
Author: Ian Muirhead
Publisher: Law Society
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