The collapse of dealer groups such as AFS Group and AAA Financial Intelligence highlight the need for financial advisers to have adequate income protection agreements with their licensee.
In an email to members, Association of Independently Owned Financial Planners (AIOFP) executive director Peter Johnston has warned that the interests of authorised representatives may not be a high priority in cases where licensees enter administration. “A very relevant issue in recent times has been the security of adviser income if the practice runs into difficulty and administrators are appointed,” Mr Johnston said.“AAA and AFS are prime examples where the advisers’ income was not quarantined and it was dispersed into general revenue to be at the mercy of the administrators’ fees.“Not wanting to be too pessimistic but there are not too many examples where anything is left for creditors after the administrators have completed their work.”Mr Johnston said the problem could potentially affect both large and small advice practices, and called on advisers and practice principals to ensure adequate safeguards are in place.Last week, ifa revealed that former authorised representatives of AAAFI will only receive commission payments owed to them by their former licensee once the appointed liquidator receives outstanding debts, and that external debt collectors had been contracted.“Once we are satisfied that all amounts have been pursued and recovered to the greatest benefit of all advisers, we will then proceed with a distribution,” said an email from a spokesperson for the liquidator Lawler Partners to a former AAAFI authorised representative, obtained by ifa.In August it emerged that former advisers of Australian Financial Services (AFS) Group, which entered voluntary administration in May, would not have access to liquidated brokerage accounts following a court ruling.In response, John Prossor, director and founder of non-aligned licensee Synchron and member of the AIOFP, called for advisers to be paid on a daily basis in order to avoid income security risks.“The non-payment of the AFS trust holdings is really unfortunate for the advisers who earned the money…. It’s not the first time this kind of thing has happened,” Mr Prossor said.“A very similar thing occurred when another licensee, Silvalake Financial Services Group, was placed into liquidation almost 10 years ago.”
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