N.Y. Lawyer Can’t Also Provide Wealth Management Services

A non-practicing New York lawyer who’s been working in wealth management for 20 years and now wants to open a law office and provide investment advisory services to law clients can’t ethically do so, the state bar said.

“The conflict between the legal and non-legal services is so severe that informed consent cannot cure it,” the bar’s ethics committee said in an opinion.

A state professional conduct rule “expressly allows” lawyers to provide legal and non-legal services to the same client, like lawyer-accounting services, the opinion said.

But some “dual practice conflicts” can’t be remedied with informed client consent because of the conflict, it said. The opinion cited the example of lawyers acting as real estate brokers for the same transaction.

The lawyer here proposes as an example “charging separate fees for creating a life insurance trust for a law client and selling the client a new life insurance policy,” the opinion said.

The legal fees for the trust work are “likely modest to the commissions for selling a life insurance policy,” and create a conflict that informed consent can’t fix because the interest in losing the commission interferes with the lawyer’s ability to render independent advice, it said.

The lawyer could, however, provide wealth management services to non-legal clients if a disclaimer is provided that no lawyer-client relationship is being formed, the opinion said.

The lawyer also wanted to know if referring a legal client to another wealth management firm for a fee creates an ethics quandary, the opinion said.

There are only very limited circumstances where lawyers can accept such fees from another party—if the service isn’t related to the lawyer’s practice and the lawyer doesn’t make a recommendation to use the service, for example—because of the strong possibility the attorney’s loyalty to the client could be compromised, it said.

Here, the possibility of that is too great to allow it, the opinion said.

The opinion is N.Y.S. Bar Ass’n Comm. on Prof’l Ethics, Op. 1200, 7/21/20.