Using an in-house investment adviser/step investment powers

I work for a Trust Corporation which was set up in 1976 and at that point, took advice from a Magic Circle firm. I do not believe that advice is still available, and it certainly predates my employment.

They drafted for us a fairly generic investment clause which included specific permission to use our own in-house IFA, whose name is incorporated in the wording. The wording is quite cumbersome, and could be cut down, because we are now generally incorporating the Step Standard Provisions and there is some unnecessary duplication. The bit I can’t easily fathom out is whether we ought to keep the specific mention of the in-house IFA. To me, it seems like there’s a risk of self-dealing, or something that looks like self-dealing, even if perhaps it isn’t strictly that. For context, pretty much all of our clients have an involvement with our in-house IFA, before they are internally referred on, so that fact, and a continued willingness to use that company have led me to assume that unless they specifically tell us otherwise, they don’t object. It does come up in discussion with clients from time to time, but only rarely

Clearly, without that background, we would be using beauty contests to select the correct adviser, and where the client specifically asked us to use another adviser (or multiple advisers), we do so, without argument. Our in-house adviser sometimes uses other firms where they consider it is in the clients best interest to do so. I don’t imagine we are the only adviser or even Trust Corporation with this issue. Are others as cautious as we have been, or if not, how is the point resolved?