Charmian Holmes, solicitor director at The Fold Legal, says being an authorised representative in the new regulatory environment poses additional risks, and that advisers should ask their licensee to let them provide advice as an employee only.
After the FOFA (Future of Financial Advice) reforms implementation date of July 1, authorised representatives (ARs) may face fines of up to $200,000 for serious breaches of the Best Interests Duty, while salaried advisers will enjoy the protection of their licensee.
“There is actually no legal requirement for employed advisers to be appointed as ARs,” Ms Holmes said. “They can provide financial services under their employer’s AFS licence without it; if an employed adviser is not an AR, these fines won’t apply to them.”
The lawyer warned that under an AR arrangement, the individual adviser will have to deal with the Australian Securities and Investments Commission themselves in the event of allegations of non-compliance, and could potentially even face the prospect of bankruptcy in some cases.
“Professional indemnity insurance doesn’t cover these fines so, my advice to them is to ask their licensee to terminate their appointment as an authorised representative right now,” she said.
For an extended version of these comments see the upcoming ifa magazine.
I have never seen so many articles pushing liability onto advisers for everything…..more so than ever before. We took one for the team over the GFC, now we get swamped with excessive red tape and potential legal risk. Market volatility is back, end of June is near…..but most of us are too busy stuffing around implementing expensive solutions to remain compliant. I just hope the new super n finance minister is reading all this this. Perhaps I’ll email him a link.
Gerry sums it up best.
Any adviser out there with any assets in their own name now needs to seriously rethink their career. You may as well walk into Slater n Gordong & hand over your assets now. Lawyers are going to tear strips out of every SOA & fact find they see in every case. You will lose every time. Dont believe me? Just wait & see, you will be the big bad adviser vs the poor little client who didnt know the risk. Who couldnt understand the 40 page thingy he signed…..an authority to what? A statement of what? I told him i just wanted to be safe……what is an instalment warrant in a smsf mean? Hey? My geared property lost money in super? What are all these fees?….help me slater n gordon…help!
This advice is so inane, that I’m going to give Ms Holmes the benefit of the doubt and assume her comments were taken out of context.
I refuse to believe that anyone would seriously suggest that AR’s would give up their businesses to sign on as an employee solely to avoid a future fine or that the licensees would welcome them. What on earth would be in it for the licensees? Why buy a cow when you can get your milk for free?
Thats the death knell to the independent IFA. I wonder if there will be any financial advisers left as independent business people in 12 months time. Probably not! can you sue the govt for destroying goodwill in business? Who in their right mind would want to be an adviser now?, who would want to buy a financial advice business now?, and which bank in now prepared to finance a financial planning business? Nil is the correct answer.
After even watching that far left show Q & A last night, even their followers have had enough of them. It was made pretty clear Bill Shorten runs the show, come on Bill call a early election, lets see what you guys have got or for ever hold your piece.
edward if you did convert your business & become an employee. You no longer have a business so you business is now worth Zero.
Charmian get real, enough BS is out there, stopping adding to it.
Although it sounds good in theory, it’s just not practical for two reasons which are 1) Any sensible business is not going to take on unnecessary risk such as converting AR’s into employees and; 2) AR’s can’t just wind up their business by terminating their agreements with licensees & demand employee terms, not to mention the client ownership issue!
PI insurers are going to have a great excuse for rising premiums with the “best interest” duties, a minimum of $20,000 pa I’d say!
Non- allingened advisors a re less than 10% of of the pool already FOFA has none gone far enough to close last 10% its now time to get the legal people to close the last 10%. Hmm what ever happened to client Best interest etc
What BS all this is
HMMMMM! I don’t remember FOFA being set up for the legal fraternity to have a field day. Then again it could just be incompetence which is inherent in the current governments’ legislative push. Just another aspect for the new government to rectify. Protection for consumers does not = nailing planners to the wall. Just as statistics can be manipulated for any outcome, a smart legal eagle can distort good advice for an outcome. There needs to be a definitive line drawn to stop “”subjective claims”. Legitimate claims -yes- B S claims -no.
Would the last self-employed adviser please shut the door on the way out, thanks.