Anything solicitors do for clients that has a bearing on the client's finances involves financial services.

Whenever solicitors are involved with money or investments for clients, financial services arise to some degree.However, solicitors must be financially aware in order to recognise this, and much work commonly carried out by a high street practice includes financial services that are not investment business at all.Investment business is the only part of financial services defined and controlled by the Financial Services Act 1986.

It requires special authorisation and the Solicitors Investment Business Rules must be applied.Investment business is defined by the Act as involving a business, an investment and a specified activity.

Solicitors are in business, and if they become involved with an investment for a client they are almost certainly involved in one of the specified activities, such as advising, arranging or dealing.

There are very limited exemptions set out in the Act.Solicitors commonly handle matters for clients that are not covered by the definition of investments, but which involve financial services.

Examples are: most national savings products; bank and building society accounts; most term assurance policies; general insurance; land and mortgages.Investments defined in the Act that are commonly handled by solicitors include: stocks and shares; gilts; unit trusts and endowment policies.When a solicitor is giving a client generic advice that does not relate to a particular investment, this does not amount to investment business and is not covered by the Act.

For example, it is not investment business to advise a client how to split a lump sum between various types of investment, or to suggest investments in engineering shares, or an exposure to emerging markets.Discrete investment business is mainstream investment business.

It is not carried out by using a permitted third party, as defined in the Solicitors Investment Business Rules.

Neither is it incidental.

Incidental activity is investment business subordinate to the firm's legal services.

The firm uses its own expertise in discrete investment and it is currently carried out by very few firms.

The opportunities that it offers will be considered in a later article.NON-INVESTMENT BUSINESS CASE STUDIES-- Mr Jones has recently died and his solicitor is winding up the estate.

Mrs Jones, his widow, is in her 70s and is in need of more income.

Among the assets there is a contingency fund of £25,000 in the bank, earning 1% interest.

The solicitor, using information from Saturday's Financial Times, advises switching the fund to an instant-access building society postal account where the interest rate is 6%.

Mrs Jones has been offered added value to her probate work, her best interests have been served, and she is delighted.

The solicitor's fee will reflect the extra i ncome of £1250 per annum obtained for the client.-- Mr and Mrs Smith are buying a house for £80,000 with an 80% mortgage.

They are non-smokers and aged 30 and 25.

The solicitor advises against the idea of an endowment mortgage and arranges a 25-year repayment mortgage.

He also arranges a £64,000 mortgage protection policy, which is simply a reducing term assurance policy, at a monthly premium of £10.80.

The solicitor knows this is the cheapest policy, having obtained quotations using an on-line personal computer.

The commission payable by the insurance company is £214 and the solicitor thinks this makes his conveyancing fee look small for the work involved.

He has agreed with the client that 50% of the commission should be set against the conveyancing fee and the client is delighted.

The solicitor has earned an extra £107.The longer a mortgage runs the steeper is the decline in mortgage protection cover.

It is perhaps better to arrange level term assurance of £64,000 to give the client more flexibility to maintain cover when moving and taking out a new mortgage.

Premiums would then be £12.98 per month, with £247 commission.

Incidentally, one life company offered premiums of £26.98 and commission of £474 for the same cover.

The solicitor could therefore have saved the client £4623 over 25 years by giving independent advice.This scenario can change if the solicitor is not consulted until the mortgage has been arranged.

At that stage, he or she can improve on the mortgage protection policy premiums offered by the mortgagee or estate agent.

The solicitor is, of course, obliged to act in the client's best interests.