Radar Results chief executive John Birt said around 20 per cent of the agency’s normal supply of practices were being restrained from selling by institutional lookback programs, which restricted the adviser from sale of their client book until they had passed an exit audit.
“Radar Results sells about 50 practices a year, primarily financial planning and accounting,” Mr Birt said.
“About 10 financial planning practices today want to sell, but they cannot move until lookback is complete. Some have been in this holding pattern for more than a year.”
Mr Birt said the restrictive contracts agreed to by some institutionally aligned advisers, combined with the expansion of ASIC’s remediation programs to cover up to a decade of historical compliance errors, meant many were simply exiting the industry without a business to sell.
“The lookback program is causing further pain for many financial planners and licensees. Some financial planners are going bankrupt and walking away from their practices, leaving clients with no adviser,” he said.
“Many planners cannot sell their practice or book of clients until they get sign-off from their licensee, saying that they have passed lookback.
“Any refund of fees, some dating back as far as 10 years, is the licensee’s responsibility under corporate law. The licensee can pass the cost onto the authorised representative if the agreement between the AR and the licensee has an indemnity clause protecting the licensee.”
Mr Birt gave the example of a recent business owner who walked away from a sale worth hundreds of thousands of dollars, after having his practice value written down below zero after failing an exit audit.
“Last year a financial planner contacted Radar Results looking to sell his small book of clients, around $120,000 of recurring revenue (RR). The estimated sale price was 2 to 2.5 times RR,” Mr Birt said.
“After a month, he walked away from the book, saying he got a lookback bill from his licensee, which is far more than what the book was worth.
“This situation is a real problem and concern for the financial planning industry.”
3 years ago I decided to change licensees so they did an ad hoc exit audit. Didnt understand their nit picking after “A” reviews and nil complaints until 6 months after I left when they folded after self reporting a rogue adviser. Not Dover but a small licensee so anyone with a clean record can be caught up in this.
Look back is a totally weaponised program to suit ASIC or licensee agenda at the advisers expense. Totally corrupt andcif the auditor can’t understand the advice or product (because they were failures as advisers themselves) then remediation payable. We went through this and it was so bad we had to get the lawyers on the job. That slows them up. If your a soft target, they will make life hell. DONT BE A SOFT TARGET.
You all bagged the bank advisers and banks. Now the world has turned and the spotlight is on you. How could you not see this coming unless you had your head in the sand.
Only a ROA or SOA is evident of a review being conducted before the annual due date anniversary.
One day late, expect to give the fees back and interest of course at a high rate, this is the expectation of ASIC, as the Client Service agreement is a contract and you did not honour the details of that contract – lawyers at ASIC.
Spot on, a contract is a contract
That’s wrong actually. If you offered a review, ASIC will accept that. If the client rejects the review 2 years in a row, then that is a problem. I think that is fair and reasonable.
This Federal Govt is totally inept
What a mess. Advisers always getting whacked with a stick each and every way they turn. Enough is enough.
Recently went through a lookback program covering 2010. On top I sat a FASEA exam, we had a stockmarket crash, dealt with Pandemic and all that entailed whilst running a business so yes 2020 wasn’t a pleasant experience. I can certainly appreciate why you’d walk away. You’d also be crazy to contemplate changing software providers and risk losing templates. So I will never be changing software programs again.
Look back, whilst in some cases necessary, has slowed buy / sell / changing license.
It is your licensee who owns the clients, not you. Most contracts contain an indemnity clause or one that can be interpreted that way or allow many other remedies.
Individual licensing is the only way out of this mess.
If that sounds bad, wait for this:
If you are with a good, decent licensee who isn’t doing lookback at the moment and you want to leave, they will do an exit audit for you, just for you.
If you are not prepared for that, you can look at a massive bill to exit.
Keep digging IFA. There is a lot more to this story. A quasi lookback is a massive deterrent to prevent advisers from leaving a licensee. Especially when they take months to do it, and use far-fetched ‘beneficial assumptions’ as required by ASIC. This can bankrupt an adviser even though they were honest citizens, with happy clients and delivering good service. It is one thing for ASIC to crucify the banks, who have deep pockets and a history of poor service. But now they are destroying small businesses and devastating the lives of good, honest people with happy clients. This lookback fiasco need to end NOW
In my look back they identified only one issue. A SOA done in 2006. A change in the proforma used by Paraplanning had that I would review my clients each year. Whereas I set this information always in my personal area of going forward and with other details. I always said that I’d over a review yearly or every three Years depending on level of advice n solutions. Of course door is always open and explained. Auditor naturally went of pro forma text and 6500 was refunded to client a d charged to me. No discussion held. No consideration for the massive file n regular contact n service provided. Just hadn’t conducted a review each year from 2006. Clients were always happy and not sufficiently interested to review the small amount of business each year. Lucky to escape a collapsing industry