Despite achieving a 12 per cent growth in adviser numbers in 2013, non-aligned dealer group Synchron says FOFA’s grandfathering provisions ensured that number fell well short of its potential.
Speaking to ifa, Synchron director Don Trapnell said that the licensee had to turn down six authorised representatives after the surprise changes to grandfathering were released in June 2013.
“We did actually say to six reps that had put paperwork into Synchron, ‘Please withdraw your resignation from your existing licensee. In all consciousness, we cannot accept you as an authorised rep because we know it will have a negative impact on your income, moving forward’,” Mr Trapnell said.
He continued that of all the changes comprising FOFA, grandfathering was the one that sent a “very clear message” out to Australians about free enterprise systems and about “our methods of trading in Australia”.
“That legislation embodies restraint of trade,” he said. “How crazy was that?
“It had to be changed, and we are very thankful the new minister, Arthur Sinodinos, actually did take that on board and has announced the changes that are going to occur.”
The grandfathering changes hit Synchron’s growth particularly hard, forcing the licensee to halt recruitment for the remainder of 2013.
Those that were recruited had their grandfathered commissions quarantined in a “separate account” to be released once the legislation is reformed, Mr Trapnell said.
“From June 2013, when we became aware of the changes, we actually stopped recruiting anyone who had grandfathered commissions,” he said, adding that the recruitment of life insurance advisers, who are exempt from the rule, continued as usual.
“But for anyone who is a financial planner or has investment commissions, we basically said it wasn’t in their interests to change licensee and join us,” he said.
There were, however, a number of advisers who came to Synchron with smaller grandfathered commissions and, believing that a change of government would address the issue, Synchron agreed to take them on.
“In those cases we actually quarantined their grandfathered commissions,” Mr Trapnell said.
“The licensee could receive [grandfathered commissions], because the contract with their product provider hadn’t changed, but the authorised representative couldn’t,” he said.
“So it was a crazy situation where an authorised rep would come to Synchron, and Synchron could receive grandfathered commissions in relation to business done prior to FOFA coming into play, but we couldn’t legally pass it on.
“Now how crazy is that?”
Synchron opened a separate bank account for the quarantined commissions, which will be released once the FOFA legislation is amended, Mr Trapnell said.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Oct 2017Parliamentary insurance group formedBy Staff Reporter
- 20 Oct 2017Treasurer introduces BEAR legislationBy Aleks Vickovich
- 20 Oct 2017Westpac to refund $65m to customersBy Annie Kane
- 20 Oct 2017Survey tips independent takeoverBy Aleks Vickovich and Jessica Yun
- 18 Oct 2017AFA suffers budget blowoutBy Killian Plastow
- 18 Oct 2017ISA ups ante on governance lobbyingBy Aleks Vickovich
- view all