Stockbrokers fear advance of lawyers

Provincial stockbrokers are worried about solicitors becoming investment managers, according to Wilsons' head of Investment and Financial Services Mark Allerston.

Allerston said that stockbrokers relied heavily on solicitors as a source of new business. A a recent survey put them way ahead of all other third-party sources of new business - they were ranked first by 55 per cent of brokers.

However, he said solicitors face a loss of control following a number of changes post-Big Bang, which saw the separation of service elements in broking and their separate pricing such as research advice, dealing, custody and settlement. This was moving towards three distinct services - execution-only, advisory with and without portfolio advice and discretionary.

The changed economics led to fees being introduced to meet higher fixed costs, competitive commissions, discretionary relationships, control over Scrip and nominee registration to cut costs. Resistance to these changes has come from traditionalist stockbrokers, in particular the fund managers. But Allerston said that Crest and Rolling settlement would give fresh impetus to change.

Allerston said solicitors could go two ways. They could choose to "pass over responsibility to the stockbroker (roll over and die approach) [or] remain involved in serving clients by operating an in-house Nominee Service and, if economic, formalising the present 'advisory' service by setting up an investment management department".

Allerston said that solicitors were at the forefront of key events which generate additional funds for investment such as inheritance, trust formation, selling land and releasing cash, personal injury claims, matrimonial settlements and redundancy payments.

He added that in addition to fund management services, solicitors were well placed to offer services such as tax advice, PEP management and pensions administration.