Most agreements between authorised representatives and their licensee have clauses “buried away in the fine print” that give the dealer group ownership of client records, said Lynch.
“Some of [the dealer groups] go further and actually slap a restraint on the adviser from accessing or contacting those clients in the future,” he said.
Lynch does acquisitions work for financial planning practices, and he says before a sale goes ahead the dealer group must give authority for the purchaser to access all of the clients’ historic information.
“One of the first questions I get my clients to look at when they’re doing their due diligence is to check that the seller actually has the authority to transfer the information that we’re looking to receive as the buyer,” said Lynch.
“There’s a lack of awareness by advisers in these dealer groups. They think their asset is liquid and is able to be sold without the cooperation of their dealer group,” he added.
Lynch acknowledged that most licensees do not enforce these clauses, lest they gain a reputation as a “poisonous” business that is “out to steal clients”.
But if a dealer group is under administration it may be a different story, since the administrator will be acting in the interests of the company’s creditors, said business broker John Birt.
“Imagine someone signs a contract to sell their business, and then three days later [their dealer group] is under administration,” said Birt.
“Then someone at the licensee’s head office gets a transfer form saying ‘please transfer all these clients and revenue across to this other licensee’. I imagine the administrator would say ‘I don’t think so’,” he said.
What legalistic twaddle this is. A law firm might “own” a client but the client follows his legal counsel when he changes law firms.
Your Doctor joins a new practice – is the car parking there as good?
Life companies own clients too until the underwriter changes life companies and the adviser starts putting business with the new one.
It’s all about trust – clients don’t care about who the licensee is – it’s the adviser they trust with their money and will go where the adviser goes.
Wake up!
I don’t usually make comment but this one needs it…..with all due respect to my learned colleague, this is old news one just has to simply deal in M&A as ew do and read the licensing agreements its this has been the case since the mid 1990’s, and yes enforcement could be a costly legal battle so why do it?
But the other truth is…the client owns the client…..and retention is about care and service….
No problems,we just all flick our dealer group and become self licenced,easy fix,just like our clients are doing flocking to the SMSF area
And I’m pretty sure what the clients would say, but it’s a little too ‘forthright’ for publication.’