Grandfathering clause ‘anti-competitive’
FOFA’s grandfathering provisions may leave authorised representatives “locked in” to their licensing arrangements and create a lack of competition in the industry, according to a business broker.
John Birt of Radar Results, a mergers and acquisitions consultant specialising in the financial planning sector, says an unintended consequence of the grandfathering regulations released on 28 June may be that they will not be covered by the exemption if they change licensees.
These advisers and businesses seeking new licensing arrangements will be treated as “new clients” under the current regulations, Mr Birt said in a statement.
In effect, this would force advisers to be locked into their existing licensing arrangements, which is “anti-competitive in nature and needs to be changed by the government,” the statement said.
The M&A consultant also flagged the possibility that this side-effect could also impact the value of financial planning businesses and limit the “number of potential buyers for that business”.
This take on the grandfathering regulations mirrors comments made this week by Association of Financial Advisers chief executive Brad Fox.
Speaking at an event in Sydney launching the AFA Adviser of the Year awards, Mr Fox told ifa that he had a very clear message to advisers on the issue.
“We are working very closely with Treasury and the relevant ministers at the moment on understanding the full implications of the grandfathering regs,” Mr Fox said.
“At this point my main message to the advice market would be: if you are thinking of joining a new licensee – particularly if you are an older business – then wait!
“The issue could be that if an adviser has grandfathered revenue with a licensee – if they moved to a new licensee that revenue would not go with them to the new licensing arrangements it would stay with the old licensee.
“There are a lot of potential implications for clients that have just not been sufficiently taken into account.”
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