Synchron warns on PI ‘Hotel California’
Non-aligned dealer group Synchron has warned advisers against signing professional indemnity insurance agreements designed to lock them into their current licensee.
Don Trapnell, founder and director of the risk-specialist dealer group, issued a statement describing the practice of charging run-off PI cover premiums as “disgraceful”.
“Advisers are being widely courted by licensees offering them, in many cases, huge incentives to join,” he said.
“It’s all very well to accept a nice dowry when you sign on to a dealer group but watch the pre-nup for the conditions that apply should you ever want a divorce.
“Also be careful on your anniversary because renewal agreements may contain the clause.”
This practice reflects “obscure logic” on the part of licensees, who are simply trying to “build a fence around their authorised representatives”, Mr Trapnell said.
A Queensland-based financial advice practice with five advisers – which is currently trying to join the Synchron network – is facing an exit fee of as much as $60,000, Mr Trapnell added.
“We call it the Hotel California clause because when imposed it means, as the song goes, 'You can check out any time you want but you can never leave'.
“Licensees are trying to get advisers to sign agreements which impose such onerous conditions and financial penalties on exiting advisers and their new licensees, that they can never leave.”
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