Major issues have come to light for the financial planning profession this week.
Grandfathering provisions set out in FoFA legislation have put a halt on recruitment throughout the industry. Licensees, such as Synchron in WA, have had to stop taking on advisers, while the legislation is clarified regarding the rules.
“I can’t see this standing the test of time,” says Synchron director Don Trapnell. “But in the meantime… I have six applications to be an authorised representative of Synchron, on hold.
“We have a duty of care. We’ve had to say to current applications, ‘if you’ve resigned from your current licensee, withdraw your resignation for the time being’.”
Trapnell says that he is not the only one to put recruiting on hold, with a couple of other major dealer groups also reportedly taking a pause.
“It’s a serious issue. It’s as big an issue as there possibly can be. Now, is this a product of bad legislation being forced through quickly without proper consultation or review processes? Maybe. Or maybe it is an intended consequence. We don’t know which.”
FPA general manager of Policy and Conduct, Dante de Gori says that Treasury is aware of the issue and concerned about the impacts that it will have from a market competition perspective.
“There are people in the marketplace today, who want to buy businesses and sell business, there are advisers that want to change licensee or indeed go and get their own license. These things don’t stop and there’s a little bit of uncertainty as a result at the moment, so Treasury do need to work quickly on a solution to provide clarity.”
De Gori says that they have to find the right balance between removing conflicted remuneration, and protecting people’s rights.
“…You want to remove conflicted remuneration from the industry and from the profession, which everybody agrees with. But commercially of course, people have entitlements that they’ve built businesses on and business valuations on…”
“Advisers have the freedom to change licensees and that decision shouldn’t be made purely just because of commercial restrictions, but what these regulations do is effectively make the decision purely commercial.”
Phil Anderson, COO of the AFA, says that this issue has come out of the dark and will affect many individuals.
“This is something we were completely unaware of until last week. It’s something that’s come as a complete surprise to the industry and is going to impact on a number of individuals who’ve either transferred licensees in last few weeks or are in the process of doing it. We’ve started discussions with the Government and intend to work with them to come up with a sensible solution.”
Anderson says that for now, advisers need to put things on hold until they have had a chance to resolve the issue.