How financial planners can learn to live with lawyers

Financial planning practices often need to use the services of legal professionals. Samantha Hills gives tips on how to find lawyers and work with them to achieve the best results.

Sooner or later, in your financial advice or credit business, you will need the help of lawyers. Despite the litany of jokes about lawyers (not many of them flattering), lawyers can be quite useful to you.

They can do a range of tasks – from drafting your financial services guide (FSG) to preparing a contract between you and your marketing firm.

In fact, legislation dictates that some services can only be provided by lawyers and not by other consultants. So what can you expect when you deal with lawyers, what is negotiable, how do you keep costs down and how do you achieve the best results?

Finding a firm

The first thing to do is to find a firm of lawyers experienced in dealing with the financial services industry. You could do this by:

• Getting a referral from someone else in the industry;
• Asking for a referral from your local law society – for example, the Law Institute of Victoria;
• Using web searches;
• Asking people in your organisation if they have dealt with particular firms in their previous employment.

The right firm of lawyers can be a one-stop shop for a range of tasks, in some cases saving you separate calls to your accountants and compliance service providers.

Depending on the firm of lawyers, they might be able to:

• Respond to everyday Australian Financial Services Licence (AFSL) and credit compliance questions – for example, “Can my credit guide and FSG be combined in one document?”;
• Draft or review disclosure documents or templates – for example, your Statement of Advice templates;
• Draft or review contracts between you and your service providers – for example, between you and your website designer;
• Respond to your queries about employment law – for example, “What is my employee’s entitlement to the discretionary bonus mentioned in their employment contract?”;
• Work with you to protect your brand – for example, by registering trademarks;
• Help you resolve disputes – for example, by negotiations with the other party without going as far as court;
• Help you with your lease – for example, by advising on its terms and negotiating with the landlord;
• Assist you with the sale or purchase of your business – for example, by preparing contracts.

Costs

Before you obtain any services from a lawyer, you need to know how they charge. Most lawyers charge based on the time they take to complete tasks.

Typically, they quote an hourly rate. This rate is generally based on the particular lawyer’s skills and experience.

Typically, although an hourly rate is quoted, the time is actually measured in six minute units.

Usually, part of one unit spent on a task (say, three minutes) is still charged as though it were a full unit. So, for example, if your lawyer spends 15 minutes on one task, this will be charged as three units of work.

In cases where lawyers charge hourly rates, you should seek an estimate of the cost of any task before you instruct them to start.

In some cases, this is difficult. For example, if you wish to consult your lawyers on an ongoing basis with basic compliance questions it will be difficult to predict the costs in advance.

In this case, you might ask your lawyer to notify you when the costs for a particular month have reached a certain threshold.

Alternatively, you can keep your own records of the time spent in consultation with the lawyer.

You are not a prisoner to the hourly rate. Many firms will be happy instead to negotiate a set ‘project fee’ with you for a task or to cap their costs for a particular project.

This might work well for something like the preparation of a licence variation application. Again, this needs to be discussed in advance of instructing lawyers to start a task for you.

Never be shy to talk costs with a lawyer.

For example, many lawyers will provide the first meeting with you (which may include some legal advice) for free, but some will charge for this. Others will charge for their time at the first meeting after the expiration of, say, an hour.

Ask up front what your lawyer is charging you.

Conflicts of interest

If you are looking for lawyers to assist you with a project that involves another party, it may be useful to disclose the name of the other party early on.

Lawyers have strict obligations concerning conflicts of interest. If you are looking at entering into an agreement to become an authorised representative of ABC licensee, a lawyer will generally not be able to act for you if they already do work for that licensee.

This is because they have a duty to act in their client’s best interests and this is a little difficult if you have two clients with interests which directly conflict with one another.

Potential conflicts of interest can often be adequately managed in large firms where separate teams and “Chinese walls” exist.

In smaller firms, the only option may be for the firm to tell you they can’t help you on this matter.

It is useful to have this discussion early rather than get a long way into discussions with the firm only to find out that they have a conflict of interest and can’t help you after all.

Disclosures and terms of engagement

As an AFS or credit licensee, you know all about disclosure documents. Instead of an FSG or a credit guide, a law firm must generally give a new client a document containing various pieces of information, including:

• The basis on which costs will be calculated;
• The client’s right to negotiate a costs agreement with the firm;
• The client’s right to request an itemised bill (a bill showing each individual item or time entry contributing to the total);
• An estimate of costs;
• Various pieces of information relating to litigation matters;
• How the client can make a complaint.

The catch is that there are certain situations in which a firm does not have to provide these disclosures. One of them is where the client is an AFS licensee.

Nevertheless, many firms will make these disclosures to you anyway. Whether or not they do, you can expect that a good firm of lawyers will carefully set out the terms of their engagement with you in writing.

You may be asked to sign a copy of the terms as evidence you agree to them, or you may be told that by continuing to engage the firm you are effectively agreeing to the terms.

When you have appointed a law firm and have an idea of the costs you will be paying, you can go ahead and instruct the firm. 

Instructing lawyers

There are opportunities for you to save the law firm’s time and, accordingly, your organisation’s money, if you brief your lawyers well. You can also ensure that you receive the kind of outcomes you are after. Some useful tips are: 

• Set out the scope of the task. You will be familiar with this from the daily activities of the financial advisers in your own practice.
  Are you asking, for example, for a review of your entire Statement of Advice template, or just the disclosure section?
• If you are seeking advice on a matter, distil your request into specific questions.
  For example, you might feel confused about the new credit guide requirements. But what is it you really want to know? Formulate a question and make it to the point – for example, “When do I need to a give a credit guide to a client?”.
• If you are asking your lawyers to prepare a document for you, give them quality information. For example, if you are asking them to prepare a FSG for you, tell them all the things you think could possibly require disclosure – your relationships with product issuers, any payment arrangements, any other benefits you receive.
  If you are asking your lawyers to prepare a submission for you in relation to an Australian Securities and Investments Commission (ASIC) consultation paper, make sure the points you ask them to raise relate specifically to areas on which ASIC has invited feedback in the paper itself.
  If you don’t, you will incur additional time on the part of your lawyers and detract from a good end result.
• Tell your lawyers what you are hoping for commercially.
  For example, do you want to know whether the law is open to interpretation in this area so you can choose whether to ‘push the boundaries’ a little compliance-wise?
  Or would you rather that your lawyers take a clear position so that you can easily decide what to do next?
  Either way, remember that you cannot instruct your lawyers to provide you with the particular answer you want. 
  Do you want your lawyers to tell you, in practical terms, what you need to do next? Say so. 
  If you are asking your lawyers to review a document, do you want them to use ‘track changes’ and ‘comments’ in the document itself, or would you prefer a letter of advice letting you know what changes should be made?
• Share your knowledge of the law. 
  This avoids the risk of your lawyers charging you to tell you something you already know. It is also really useful if you are briefing your lawyers in an area in which they have limited experience but you have a little knowledge yourself.
  For example, your organisation might have been relying on a particular ASIC Class Order for relief.
  If this is relevant to the task, tell your lawyers the number and nature of the Class Order.
  By way of another example, you might have a query that relates to cold calling.
  If you know a little about the Do Not Call Register requirements and you suspect that your lawyers are not so familiar with them, share what you know.
  Even though your lawyer will double-check what they are told, this will still save them time.

Retaining the value

When your lawyers have reviewed and amended documents for you, keep good track of version numbers and dates at your end.

Your lawyers should be doing the same at their end. If you don’t, you risk using outdated versions in your business and losing the value of having the lawyers’ input in the first place.

This is particularly important with things like your compliance manual which aren’t often read cover to cover, but which are generally subject to detailed scrutiny when you have a licensee review.

Communication

Communication plays an important role in your relationship with your lawyers.

Many lawyers prefer email and letters as a form of communication but you are entitled to pick up the phone and call them.

Verbal discussion is often the best way for you to explain exactly what you want from your lawyers. It can also help you get more precise and practical answers.

On the other hand, don’t be surprised if your lawyer tells you they have to go away and think about the issues, or research them, and prepare a written response.

Some areas of law are complex or uncertain so that the only way to arrive at an answer is for your lawyer to follow the law through many twists and turns and document each one as they go.

Although this may result in a lengthy letter of advice to you, there may still be value in you having a quick chat with them when they have reached their conclusion.

Legal professional privilege

Most of your communications with your lawyers will be confidential because of the nature of your relationship with your lawyers.

More importantly, many of your communications will be protected by legal professional privilege.

This means that communications with your lawyers made for the dominant purpose of you receiving legal advice (including the advice itself) or in anticipation of litigation are given special protection.

Not only can they not be disclosed to third parties without your consent, but if a third party gets hold of them, they cannot be used in proceedings against you.

When you find the right lawyers and deal with them effectively, they can help your business both manage risk and grow. Lawyers need not be a necessary evil. Let them be an opportunity.

Samantha Hills is a lawyer at Holley Nethercote Commercial Lawyers.