How solicitors can offer financial-advice referrals without becoming regulated

Legal work manufactures financial crossroads. The probate client receiving £180,000 asks what to do with it. The divorce client with a pension sharing order needs somewhere to put it. The director selling a company wants the proceeds to become a retirement. The conveyancing client mentions, in passing, that the deposit came from an inheritance nobody has thought about since.

None of this is legal advice, and solicitors know better than most professions where their competence ends. The question is what happens next. Silence serves nobody. A vague 'you should get advice' converts poorly — clients rarely act on unnamed suggestions. A specific, compliant introduction to a regulated financial adviser serves the client, evidences good practice, and can lawfully generate a fee for the firm. The machinery for doing it properly already exists in your compliance manual. Mostly.

Two principles do most of the work. First, transparency: under the SRA Code of Conduct, clients must be informed of any financial interest the firm has in a referral, and paragraph 5.1 requires you to account to clients for financial benefit received as a result of their instructions — unless they have agreed otherwise. In practice, that means written disclosure of the referral fee and the client's informed agreement that the firm keeps it.

Second, independence of the destination. Where a referral concerns retail investment products, SRA financial services rules require the introduction to go to a person who can provide independent advice — an adviser restricted to one provider's product range will not satisfy that. Checking the adviser's status takes minutes on the FCA Register, and it belongs on the file, not in someone's memory.

Most firms rely on the Part 20 exemption under the Financial Services and Markets Act 2000: regulated activities only where they are incidental to legal services, under Law Society supervision. Recommending a pension fund is not incidental to anything. The clean position is to stay out of arranging and advising altogether and do the one thing that needs no permission: introduce.

An introduction means naming the adviser, explaining why you rate them, and connecting the parties — without commenting on products, providers or strategy. The line between 'see an adviser about that inheritance' and 'you'd be sensible to invest it' is thin in conversation and enormous in law. Fee-earners under time pressure blur it. A two-line script in the precedent bank keeps everyone on the safe side.

Ad hoc referrals leak. Someone forgets the disclosure letter; someone refers to an adviser who changed firms; nobody knows whether the client ever got seen. Treat referrals like any other regulated workflow:

• A short approved panel of independent, FCA-checked advisers, reviewed annually.
• A standard disclosure and consent letter covering the fee and the client's freedom to choose.
• A file note per referral, and a follow-up at 30 days.

Referral platforms such as SmartPeer track each introduction and generate the disclosure letter automatically, which suits firms already run on audit trails. Done this way, referral income stops being an awkward grey area and becomes what it should have been all along: a documented service line that clients actually thank you for.