Professional Competence Update – New SRA Guidance on Effective Supervision

In an early edition of our ‘Legal Partner Update’ last year, we highlighted that your oversight regulator, the Legal Services Board had issued a paper on ‘Professional Competence’. They were expressing concern at whether the new regime introduced in 2016, which moved from structured hours CPD for lawyers and gave personal responsibility to individuals, was actually working efficiently for lawyers and indeed the consumer.

The SRA has been reminding solicitors regularly over the past 6 months, via social media and on their website of their responsibility to maintain professional knowledge, ensuring that the legal advice that they offer is always relevant, the most up to date, and of course, in their clients’ best interests.

However, on the 23rd of November, the SRA issued fresh guidance on this subject, directed at firms/COLPs and encouraging them to take more of a grip and responsibility for evolving systems and putting procedures in place to support their staff and supervise their training/knowledge enhancement.

The full guidance can be found here. It seems the regulator is clearly taking the need for individual solicitors to take their own professional competence so seriously that it is directing firms, and this will again be the COLP, to consider how to set up, run and oversee the supervision of the relevant CPD.

A quick reminder of the relevant section of the ‘Individual Code’ on CPD:

“The code also requires that you make sure that those you manage are competent to carry out their role, and keep their professional knowledge and skills and their understanding of their legal, ethical and regulatory obligations up to date”

And the corresponding section in the ‘Firm Code,’ 4.2:

“You ensure that the service you provide to clients is competent and delivered in a timely manner, and takes account of your client’s attributes, needs and circumstances.”

The desire by the regulator for there to be FIRM-WIDE processes in place is clearly set out in Section 2 (2.1) of the Firm Code of Conduct. However, in this instance the SRA has gone further and actually instructed solicitor practices to establish processes to ensure their individual lawyers are continually maintaining their relevant knowledge and to implement a mentor/supervision model. (As a side note this expectation is for there to be firm-wide third-party referral procedures too!)

At Forrester Boyd Wealth Management we have a vastly experienced and qualified team of financial planners who are willing and more than capable of providing relevant training in the areas where our work and advice overlaps with your own. We believe that an understanding of how our financial advice can dovetail with your legal advice in areas such as estate planning, divorce and trustee investments is invaluable knowledge and will indeed ensure your own advice is appropriate. It will also assist your lawyers to know which stage of a particular process will be up to date and accurate.

In addition, because Forrester Boyd Wealth Management are proud members of SIFA Professional, we are able to offer not only the renowned technical handbooks on Trustee Investment, Estate Planning and Pensions and Divorce, but we can also offer complimentary monthly relevant CPD webinars for your team. Thus, allowing your lawyers to regularly update knowledge relevant to their own field of expertise from the comfort of their own desks.

If you are keen to make this part of your firm’s process for professional competence you can discuss this with us, and we will ensure you are added to our list for monthly advance invites to these events. In the meantime, you can click here to read about this service. As you will see recent topical subject matter has covered areas such as, IHT and the Nil Rate Band, the use of Business Relief in estate planning, the growing need to collaborative advice on care funding, business protection for your corporate clients and so much more.

The IHT Threshold Freeze increases the need to advice

Just prior to Christmas the UK Government announced its 6 months tax receipts, across the board, for the period April to November 2022. Within the report the IHT receipts were revealed to be up by £500 million on the same period in 2021. The large jump in income for the revenue from estates represents a 14% increase.

Of course, this information takes on a new significance when considered alongside Jeremy Hunt’s Budget decision to freeze the inheritance tax threshold until 2028. Whilst this extension may not on its own appear alarming as it has been the same since 2009, the increase in the value of people’s estates, primarily driven by property prices, makes it increasingly so.

The much spoken about Office of Budget Responsibility is on record saying it now expects the extended freeze to the nil-rate band to increase IHT receipts from £6.1 billion in 2021/11 to, as high as £7.8 billion in the tax year 2027-28. This increase of £1.7 billion to the HMRC would represent a massive 28% augmentation over 6 years.

So, the extension of the threshold freeze, is the continuation of a subtle but highly effective strategy for the Government, particularly when faced with the enormous hole in the country’s finances in this turbulent and challenging post-pandemic period.

Having accepted the facts above, the reasons behind them and what they may mean going forwards, as professional advisers whether legal or financial, we need to keep in mind, the old adage, that to some degree at least, IHT is a voluntary tax. Both financial planners and solicitors have the knowledge and the tools to assist clients reduce or mitigate the amount of inheritance tax an estate will have to pay. This being the case, at Forrester Boyd Wealth Management, we would far sooner look to help and advise our clients about estate planning and passing wealth tax efficiently to the next generation in conjunction with a solicitor or appropriate legal professional.

Whether it be by regular small gifts, larger ‘without strings’ gifts, within the estate for 7 years or made within an appropriate trust, we would always seek to work with a client’s existing solicitor or, as is often the case, refer them to a legal partner we trust and work with regularly. Similarly, we have considerable expertise in advising on tax-efficient investment vehicles that utilise the Government based Business Relief. It is important also when advising clients concerned about passing on their hard accumulated wealth efficiently, that we also take into account any pension fund assets which are treated very favourably for IHT purposes.

In short, in isolation we can individually offer advice on potentially reducing IHT and passing on assets tax efficiently, but working collaboratively, we firmly believe that our mutual clients’ will achieve outcomes that are more likely to be in their ‘best interests’.