Exiting advisers face $12,000 fee

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On top of the already-cumbersome grandfathering issue, another “serious impediment” to the free movement of advisers has been discovered by Synchron director Don Trapnell.

Trapnell is currently trying to add five advisers to his licensee, but says that their Queensland-based licensee wants to impose a run-off PI cover charge, which effectively acts as an exit-fee.

Trapnell says the practice of charging advisers run-off cover premiums is disgraceful. “We obviously have PI cover and we do not receive a bill for run-off cover,” he says. “If licensees are not charged for it, how dare they demand it from their exiting advisers?”

This fee can be as much as $12,000 per adviser, so for the five advisers to join Synchron, there will be a cost of $60,000 – too much for a small practice.

Trapnell says that licensees are starting to impose what he calls Hotel California clauses – You can check out any time you want but you can never leave

These clauses place onerous conditions and penalties on exiting advisers, which make it near impossible for them to leave. Some of the other conditions licensees are attempting to impose include a requirement for the adviser to review advice given to all clients within three to six months of termination.

“It is impossible to review a client without physically making contact,” Trapnell says.  “What happens if the client doesn’t want a review, has moved overseas or simply changed address and not told their adviser? Many life advisers have in excess of 500 clients. It is physically impossible to review them all within a three to six month period.”

It also creates a PI insurance problem for the new licensee, because if an incoming adviser has signed the clause and is unable to honour it, they will not be covered by PI insurance, says Trapnell.

“How do you review the needs of clients without talking to them? If a client says no, then no PI is in place and if there is no PI in place a licensee has breached licensee conditions and risks losing its licence. These agreements also attempt to contract a person – the client – who is not party to the agreement.”

  • James Howarth on 27/09/2013 11:14:13 AM

    Another of the many reasons why dealer groups should be abolished in favour of direct individual licensing by ASIC.

    Add this to the minimum 14000 annual fee and you start to see why ASIC is far too high a cost on society.

    When ASIC mop up the mess instead of prevent loss there Is a real argument to get rid of ASIC in advice.

    Products need regulation advice does not.

  • Bill on 27/09/2013 11:46:55 AM

    I was under the impression that PI cover was cover for the advice at the time the advice was given. It appears that you need to be also covered at time of claim. I feel that this is a doubling up of premiums for one event.........I could be wrong

  • Alistair on 27/09/2013 12:56:11 PM

    Again, we would expect the regulator and the ACCC to help in preventing such nonsense. But these giant intellectual derelicts are again asleep at the wheel.
    Section 51 of the Trades Practices Act refers to unconscionable conduct. These are just words of no value as time and time again, this law is broken by many. Sometimes you may find the odd example being televised but for the main, it is just nonsense words enshrined in law which does not get applied like a baseball bat to the folk that break this law.
    Dealer groups who do such a disgraceful act should be named and shamed publicly.
    They certainly do not deserve support from any adviser if they are seeking to be disgraceful as this.
    Where is the ACCC ASIC and for that matter the FPA ( via its Code of Ethics for members both Dealer Groups and Advisers ). Perhaps the FPA should consider turfing a dealer group like this out of the FPA.
    The "leaders" in this industry are highly questionable and on a matter like this could show some spine and stand up for advisers or continue having cups of tea and biscuits, anointing themselves with fancy titles and remain spineless as they currently appear. This includes the regulators and associations.
    Stabbing advisers in the back like this is simply not right.

  • GAB on 27/09/2013 2:02:58 PM

    A code of ethics obviously doesn't apply to dealer groups....ive just about had a gut full of mine. Telling me I should move to a set fee for advice and yet quite happy to feed off my overrides and make it unattracative for me to change to a fixed dealer fee. Talk about vampire squids....they are a perfect specimen.

  • Jim on 27/09/2013 2:59:23 PM

    $14k!! I wish, try $21k + 3% of gross revenue and another $14k for a second adviser....and I still get grief from my Licensee about writing more business with the investment/insurance arm of their parent company. It's time the Licensee's started to justify their value as mine certainly isn't worth the money I pay them.

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