Small and mid-tier dealer groups need to be careful in selecting advisers to licence in order to protect against the risk of bad advisers damaging the group as a whole, according to FYG Planners.
ifa recently reported on remarks made by Forte Asset Solutions director Steve Prendeville that dealer groups must be wary of ‘Trojan horse’ risks associated with accepting new advisers.
Commenting on this, FYG Planners managing director Peter Mancell told ifa this was very much the case.
“I would say that Steve is not mistaken, I would say that selection of advisers to join a small licensee like ours is absolutely central to protecting all those that are already part of the group,” he said.
“We don’t have an institutional shareholder, we don’t have a CBA or a Westpac cheque-book to clean up after someone does the wrong thing.”
Mr Mancell said no matter how much professional indemnity or statutory liability insurance a dealer group buys, it’s important to appropriately screen the potential candidate, adding that FYG’s personal philosophy was that potential recruits must first pass the ‘dinner test’.
“If we wouldn’t invite them to have dinner at our homes with our families, we wouldn’t invite them into the group,” he said.
“After that, it’s about getting all their industry history, doing thorough reference checking, making sure we get access to really thorough records of their historical work performance.”
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