Join the dots

With activities-based regulation on the agenda, practices with a multidisciplinary approach are already reaping the commercial benefits, says Ian Muirhead

Two of the first of a handful of financial advice firms that have obtained ABS licences to provide legal services, Bobby Dhanjal Wealth Management in Leicester and Chesterton House Financial Planning in Loughborough, recounted their experiences at the recent SIFA conference.

Both firms complained about the lengthy and complicated application process. For Dhanjal, this had taken 18 months and had been "a nightmare", while Chesterton commented that the Solicitors Regulation Authority had little understanding of the concept of multidisciplinary practice.

By contrast, the Institute of Chartered Accountants in England and Wales - which has long been supportive of its members' involvement in non-accountancy activities such as wealth management, estate and IHT planning, and trust work - expects that when it begins licensing ABSs (late summer), the process will take just eight weeks. Notably, it expects to be licensing firms other than accountants.

For Dhanjal and Chesterton House, issues arising out of the SRA's antipathy for dual SRA/Financial Conduct Authority regulation have precluded the creation of integrated businesses, and both firms have elected to operate as parallel legal and financial business units with common ownership and management.

Dhanjal is a new firm, having been established as recently as 2009, but has grown organically to its complement of 20 advisers and eight support staff and has longer-term plans to expand geographically and to add accountancy to its suite of services. Its vision is to create a multidisciplinary one-stop shop.

Chesterton has 11 years' experience of working with solicitors, having established a joint venture for financial services with a local law firm in 2003, which will be ongoing alongside the ABS.

It already provides tax returns and other accountancy services alongside its financial planning business and has the more specific business objective of "enabling clients and their families to grow, manage and protect their wealth over generations".

Both firms regard the key to success as being the ability to break down barriers between disciplines, to overcome the cultural differences and to ensure that all staff have a sufficient understanding of each other's work, to be able to appreciate the synergies, and to maximise the opportunity for cross-referrals.

Regular internal training is provided and staff are seconded between departments to gain experience of working in other disciplines.

Marketing tool

A key element in Chesterton's client proposition is what it refers to as its estate plan: a formal document that provides guidance and information designed to assist attorneys, executors and family members to ensure that clients' wishes are met in the event of death or incapacity. This also acts as a useful marketing tool for legal services.

The fact that these early multidisciplinary ABSs have been established by IFAs rather than solicitors is highly significant. Certainly, it reflects a greater sense of enterprise on the part of the financial advisers than is present in the make-up of most solicitors. But it also reflects the reality that the IFA practice provides a better platform for the combined business proposition.

Unlike the essentially transactional legal service, it is relationship-based, commencing with comprehensive client fact-finding involving dedicated IT systems that facilitate client segmentation for marketing and business development purposes on a firm-wide basis, while the systematic review of clients' circumstances and regular updating of client data does much to ensure ongoing client loyalty.

The IFAs, for their part, stand to benefit reputationally from association with the legal profession. Both firms have commented on the kudos they have acquired from being seen to be regulated by the SRA.

The acid test is client opinion, and they have remarked on clients' appreciation of their ability to provide a joined-up service which addresses their various professional needs in a relatively seamless manner.

The Legal Services Board and the SRA have stated their intention of moving towards activities-based regulation, and these firms are demonstrating the commercial benefits of multidisciplinary practice.

Ian Muirhead is director of SIFA

He writes a regular blog for Private Client Adviser