• subs-bellGet the latest news! Subscribe to the ifa bulletin

Licensees own your clients, says lawyer

Many advisers would be shocked to learn their clients are technically owned by their dealer group, says Nicholas O'Donohue & Co senior associate Adrian Lynch.

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.