It is possible that the lawyer's professional judgment might be compromised by a motivation, overt or subconscious, to preserve the advisor's fee-sharing arrangement, even though a change in the client's financial interests might suggest some other arrangement. It is possible a lawyer might be motivated to give the client different or inferior legal advice due to the pecuniary interest involved with the financial advisor. There is a potential conflict if the lawyer were asked to mediate, litigate, or otherwise remedy a problem due to deficiencies on the part of the financial advisor. There is a possibility that the client might have been able to negotiate a lower commission had the lawyer not been receiving a commission from the investment advisor, and hence the arrangement might not be fair to the client. For example, a lawyer performing estate-planning services for the client might be in a position that is more likely to exert undue influence than a lawyer providing entirely unrelated legal services.
Additional issues arise if the investment advisor is also a client of the lawyer.
In view of these concerns, the Committee believes it will be very difficult for a lawyer to maintain independence while taking a percentage of an investment broker's services due to a client referral. Nevertheless, the Committee concludes the spirit and specific language of Rules 1.7 and 1.8 require that individual lawyers involved in this type of situation be permitted to consider all of the facts and reach a determination whether a conflict of interest exists. As long as such a determination meets the specific requirements of Rules 1.7 and 1.8 and is objectively reasonable in view of concerns expressed in this Opinion, there will be no ethical violation. I Rule 1.7. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation to each client of the implications of the common representation and the advantages and risks involved.