Conflicts of interest exist between attorney and client. If the attorney employs someone that has a personal relationship with a client that can cause a problem for the attorney. For example, if this is a divorce client, and the other side deposes the client about other relationships and the client's answer is different that what the attorney knows, that's a problem for the attorney (your employer).
When employees cause problems for employers, employees get fired. That's why I'm think your problem is an employment problem, not a conflict-of-interest problem.
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You don't have an attorney ethical issue - you have an employment problem. I am changing the topic to employment. Of course, the lawyer (or accountant or most other professionals) are right to be concerned about relationships between clients and staff. The extent of such concern depends on the facts. Obviously it is a problem.