Natalie Wright, from Law Society partner Mazars, looks at the importance of due diligence and considerations of your reputation when referring to financial advisers

Natalie Wright (Mazars)-600x400

At some point in your professional career, you have probably been in a meeting and, partway through, realised that you do not have the expertise in a specific area that your client needs help with. In a larger practice, you may have someone internally that you could introduce to support the technical aspects, but what do you do if you don’t have this luxury?

Do you know someone in another practice that you think has the skills, experience and expertise to help your client? Do you trust them? The old maxim still applies; that people buy from people they trust. A referral from you is, in your client’s mind, a big tick in the trust box. If that referral doesn’t go the way you expect, then your client can also lose faith in you.

Although the scenario above refers to legal advice referrals, the same questions apply to any referral to another profession, whether an accountant, a surveyor or a financial adviser. Therefore, it is especially important for your reputation that you take steps to ensure, as far as possible, that any firm you refer your clients to will do an excellent job. 

There is also an important regulatory aspect to consider, as the Solicitors Regulation Authority expects solicitors to be able to demonstrate to clients why they believe a referral to a third party is in their best interests. Additionally, law firm managers and compliance officers need to have processes in place to enable best practice in this area. 

Process and procedures

The key starting point is to understand the types of referrals that your business is likely to make; only then can you design proportionate and risk-based guidance for your firm. For example, how often will your firm be referring work to your introducers? How specialist is the work that you will pass on? What is the risk of failure, to both the client and the firm?

You will need to consider how your firm presents the introductions: is it a personal introduction to that firm or are you providing a list of potentially suitable firms that the client can contact themselves and then make their own decision?

Any guidance you write on referrals will need to include some draft definitions of what can be dealt with via what type of process (or what falls outside of the process altogether). You will need to consider whether your guidance is a set of high-level principles for individuals to follow, or whether you move to a panel of preferred referrers and what happens if someone wants to go ‘off panel’. It is also unlikely that a single firm will be able to deal with all your clients’ potential needs and so flexibility may be required. 

You will need to determine whether you want to keep track of referrals made to ensure that individuals within your firm are sticking to the rules. There will also need to be a process in place for reviewing any panels you set up on a regular basis.

Finding a good financial adviser

There are approximately 30,000 Financial Conduct Authority (FCA) registered advisers operating in the UK. There is a good chance that you already have some existing contacts that you have worked with previously. If you do not know any financial advisers, then you may have to reach out to friends or colleagues to get some names. Alternatively, you may have met a few at networking events.

When making a selection, you should also think about using search engines such as the Wayfinder ‘Find a planner’ tool, independent ratings companies such as VouchedFor, or lists produced by reputable companies, such as the FTAdviser’s Top 100 Financial Adviser 2023

A key question when thinking about which firms to refer people to is: what are your clients’ needs? Similarly to legal practices, financial adviser firms can be generalists or specialists. There may be aspects of financial advice that they are not experts in, or that they are not regulated and authorised to deal with.

A question that is sometimes asked is “what is the difference between a wealth manager, an investment manager and an independent financial adviser?” The answer is often not much, as it’s the regulatory permissions and focus of the firm that drives what they do and how they work with their clients, not necessarily how they badge themselves. Sometimes the title is quite simply just that.  

The needs of your clients will help define the depth of the process and due diligence you may want to apply in your own firm. The questions on the next page can be used to provide a framework to help you select your firms. 

Are they a legitimate firm? 

Firms and investment advisers can be searched for in the FCA register. Just be careful that the individual / firm that you are looking at is the same firm shown, as it is possible to impersonate legitimate firms.

What can the firm do? 

The FCA register also shows the activities and services that the firm is authorised to do (insurance, pensions, investments and so on). However, some of the language used is taken directly from legislation and may not be clear unless you are versed in this area, so ask the firm to simply explain what they can do. For example, directly advising on the purchase of shares requires specific qualifications that are not covered by the standard qualifications that many financial advisers hold. 

What does the firm do? 

Just because a firm can do something, does not mean that they are experts in it. If you are looking at a referral for a specific type of advice, such as advice involving international assets, ask the firm how much of that work they have carried out and when they last dealt with a similar case.  

Who can the firm advise the products of? 

Find out if the firm has any restrictions on what they can advise.

Is the firm restricted or independent?

For example, some firms restrict themselves to only recommending investment products from one or a small number of investment companies, or insurance products from a small panel of insurers. This does not mean that clients will get a better or worse deal; however, a wider choice, such as an adviser being independent, increases the likelihood of a better outcome for your clients. 

What qualifications do the advisers have? 

The base-level qualification for a financial adviser is a diploma in financial services; this provides evidence of core technical knowledge and financial planning capabilities. Higher-level qualifications such as chartered or certified qualifications evidence a wider breadth of knowledge, and a willingness to learn and improve.

If you are looking to refer in a specific area, such as long-term care or inheritance tax (IHT), ask for evidence of specific qualifications. Remember that it is not just the adviser who is important; in many firms, a paraplanner (a financial adviser equivalent to a paralegal) does much of the background technical work, and their knowledge and experience can be especially important.

Equity release is becoming a more useful and prominent method of addressing IHT planning for many families who find themselves in a situation where the family home is the most valuable asset. And yet, to advise on this, someone only needs a basic level 3 certificate to meet the FCA’s requirements. However, there is a level 4 certificate in Advanced Mortgage Advice, which goes above and beyond the FCA’s minimum requirements. This qualification enables advisers to expand their advice capabilities, and advise clients with complex needs and circumstances. Looking for advisers who are going above and beyond minimum requirements may give you more confidence.  

The Chartered Insurance Institute, Personal Finance Society, and Chartered Institute for Securities & Investment are the largest professional bodies for financial advisers in the UK. They allow advisers to continue learning and take exams to reach chartered, certified or even fellowship status. A list of relevant qualifications, including sector specific and advanced exams, can be found at here.  

Will the firm / adviser stick around?

There is no expectation here that you complete a forensic accounting review of the firm’s books to investigate if they are financially sound, but have you sense-checked the accounts? Are they profitable? Could they survive a financial shock? Many investment firms are required to produce disclosures on their capital adequacy, and these are normally available on the firm’s website. It is also worth checking to see if they have appropriate professional indemnity insurance in place. The key question is what are their limits of cover, both as a single payment and in aggregate, as you need to be sure that their insurers will cover liabilities should the worst happen. A further consideration is that the average financial adviser in the UK is in their late 50s, with only 6% of advisers being under 30-years old. 

Are they keeping data secure? 

It is important to understand the security of the information they hold and if they have ever had any data breaches. Data breaches can be incredibly harmful, and it is both your own and your client’s data that could be at risk.

Does the firm have a good reputation? 

Often this requires no more than some simple internet searches. You may also want to ask them about complaints they have received.  

Do the culture and values of the firm align with your own? 

If the referral to a professional adviser is seen as an extension of the service you are providing, you need to be comfortable that the firm and the individual adviser would treat the client in the same way that you would. For example, if your firm takes a strong stance on social and ethical issues, does the prospective referral firm also do so?  

How does the firm’s advice process work? 

Quality financial advisers create a long-term plan for their clients (including the identification of needs and goals) and bring this to life using cashflow modelling. They will meet with clients at least annually to review the plan and to update it.

They will also be completely transparent on how they will charge their clients. Also consider whether you want to ask how their advisers are remunerated. Is the incentive simply short-term sales or does it include quality metrics?

It is also important to consider how they will interact with clients: do your clients need an in-person service or would they be happy to meet virtually, are there any aspects of vulnerability to consider and how will this be addressed? A further key point is how you will be involved in the process going forward and how information will flow between the parties.


As with any process, implementation is key. If your process is likely to be based around high-level principles and/or trusting individuals to carry out their own due diligence, how can you evidence they are following the spirit of the guidance? If it is based around centralised due diligence being carried out, how will it be resourced and could this lead to delays that harm your clients?

The important bit is understanding how referrals work in your business, having some clear processes in place and being able to evidence that they are working as expected. The question you need to answer is, what is my reputation worth if I refer poorly?