Joint Ventures

An alternative to a referral program and a model that is becoming used more widely is a joint venture formed between a law firm and an existing firm of financial advisers.

The reason for this is that many firms recognise the change in the financial services sector and view the profession as an equitable one and as such see value in an alignment or development of their own standalone proposition.

Setting up a completely new financial planning department in a law firm would normally take considerable time, effort and resources. To that end and to simplify the process numerous firms throughout the UK have created Joint Ventures with reputable professional firms, like OCM Wealth Management.

When compared with a referral relationship between firms, the joint venture model has two main advantages:

  1. It creates a greater sense of commitment on the part of the solicitors
  2. It enables the solicitors to avoid the issue of commission

Under the separate business rules, solicitors must declare their financial interest when referring clients to a separate business in which they are involved, and must point out that the statutory protections available to solicitors’ clients do not apply.

However, they need not account for dividend payments, subject to the important caveat that the joint venture works on a fee basis and has itself accounted to clients for any commissions received.

For FCA purposes, the joint venture will be regarded as an appointed representative of OCM Wealth Management Limited, which will be responsible for the joint venture’s compliance. The solicitor participants are therefore relieved of responsibility to the FCA.

The IFA firm will also manage the joint venture and will levy a management charge on the income of the joint venture, which might typically be around ­70%, with the balance being available for distribution as dividend.

One of the issues with joint ventures is the question of whether it will always be in clients’ best interests for solicitors to refer them to a particular IFA firm – that is, the joint venture. One way of solving this is for the joint venture to have its own sub-relationships with other IFAs who possess qualifications or expertise in areas.

If you would like to discuss this opportunity further to form a Joint Venture with one of the UK’s leading IFA and Discretionary Asset Management firms please contact us on 0845 338 1971.