A Western Australian financial planner fighting to receive payment of a client fee has warned the industry that it may become dependent on the services of debt collectors under FOFA.
Simon McGrath, senior financial planner at Westbridge Securities, implemented a fee for service system over past months but has since run into problems with this revenue model.
McGrath told ifa that a particular client has refused to pay for advice on wrapping up his self-managed superannuation fund, despite a fee agreement being in place.
“I’m now in a situation when I’ve given the client a date by which to pay and if he doesn’t I’m going to have to go to a debt collector and if the debt collector doesn’t have any more luck than me then I’m going to have to take it to small claims court,” he said.
“I’m now seriously considering bringing a debt collector into my business model and referring all debtors to them.
“I didn't set out in the world to be in a position where I have to sue my clients just to get paid, but this might be the reality of the situation.”
Describing the issue as the ‘underbelly of FOFA’, McGrath said he is now worried about the administrative cost of chasing debts and enforcing fee agreements.
“Some advisers could be one debtor away from administration,” he said.
In hearing of McGrath’s situation, Brian Boggs of the Leading Minds Academy has reminded advisers they need to be prepared for all facets of the new regulatory regime.
“In the new world post-July, advisers are now price-makers and not price-takers which means they now will come into contact with creditors, debtors and issues relating to cash flow,” he told ifa.
He says advisers who run their own practices will now need to have processes in place for these situations and should consider tasking a staff member with chasing clients’ debts.
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