The two Melbourne-based organisations have issued a formal submission to Treasury’s public consultation on FOFA, calling for a re-examination of the contractual relationship between AFSL holders and their authorised representatives.
Reflecting on the collapse of non-aligned dealer groups AAA Financial Intelligence and AFS Group in 2013, Synchron director Don Trapnell said the current arrangement whereby monies held by a licensee on behalf of authorised reps (ARs) are considered assets of the licensee itself is “ludicrous”.
“The adviser is the one that has provided advice to the client not us,” Mr Trapnell told ifa. “They are the ones that assisted the client in meeting their financial objectives.
“Unfortunately when AAA and AFS went broke, they highlighted a major issue – $1.5 million of adviser money went into liquidators hands when AFS went under.
“What right does a liquidator have to take the commissions of an adviser when they have actually done the work to get that money – it is not the licensee’s money,” Mr Trapnell added.
“This is about the right of advisers to be paid in a timely fashion and have the faith that they will be paid the money that they will be paid the money that they have rightly earned.”
An ifa investigation has previously revealed former ARs of AAA Financial Intelligence are currently locked in legal disputes with their former licensee and its liquidators in relation to product commissions allegedly owed to them.
The submission put forward by Synchron and Lander & Rogers specifically calls for amendment of Section 911A of the Corporations Act, in order to allow “a person who acts as a representative of an AFSL” to “enter into commercial relationships in their own right with providers of financial products”.
In a statement supporting the submission, Lander & Rogers partner Ruth Stringer said the proposed amendments would in no way “disturb” the consumer protection elements of the Corporations Act.
“We believe licensees and their advisers should be free to adopt whichever business structures best suits their commercial circumstances,” Ms Stringer said.
Tend to agree with Michael Pinn.
AS an RM, Director, part owner, & Authorised Rep of an AFS Licensee, its pretty clear who has the legal obligations and duty to the regulators. If Synchron are just running an adviser ‘collective’ where they are a conduit through which insurance commissions are funnelled then they would seem to be out of step with where the broader industry(dare I say profession) is heading.
For that licensee to have $1.5 Million in pending commission payments they must have have had 2-3 months worth revenue payments backed up and not paid them in full earlier. I also agree with comment #2, under the CA licensee’s are RESPONSIBLE for their appointed AR’s. When it turns pear shaped it’s the Licensee who gets sued so Don Trapnel needs to change strategy there!
What a load of misinformed rubbish.
There is little doubt that some AR’s have been unfairly the funders of Liquidators. However had they wanted to be employees, and not contractors, their entitlements would have had a lot more protection.
Had they bothered to understand the obligations of having their own licences and made a commercial decision to not have one then they should have taken the potential downside into account.
AFSL’s have responsibilities regardless of what an AR does or does not do. This includes making good to everyone including product providers for the losses incurred, including clawbacks for cancelled policies.
If an AFSL wants to run a “trust” relationship for AR’s they can do so now without any changes to the law. if AR’s want that change, and are prepared to pay for the associated administration I am sure that an AFSL would provide it. let the commercial realities of the market place deal with it and not the blunt instrument of government.
Our licencee has already changed the constitution and the banking arrangements so that brokerage does not become an asset of the licencee until the adviser split has been paid
Problem solved
Don’t agree with this approach. The AR may provide the advice, but ultimately the Licensee is responsible for that advice under FSR Act and Corporations law. Revenue payments must come to the Licensee first.
We pay our ARs bi-monthly so this is not an issue for us as a Licensee. I am not sure the product providers would like to have to arrange individual agreements with all ARs.
I can see the ratioanle is this submission. Perhaps if Authorised Reps can enter into commercial relationships with providers of financial products, it may also affect the PI position of the ARs and they will need to take that additioanl cost into account in assessing what they wish to do. Or, ARs should do more due dilignece on who they beocme ARs with…………