To be, or not to be…an AR

by |

The Fold legal firm is encouraging advisers to rethink their authorised representative designation, after discovering a possible $200,000 liability.

Charmian Holmes, solicitor director at The Fold, says that many advisers haven’t had a close look at their liability as an authorised representative. Although she can see both sides of the argument, she thinks it is unfair to penalise advisers who are following the policies of their licensee.

“If you’re an employed adviser and you’re only ever advising clients of your employer, why should you risk this type of personal liability? You don’t have to, it’s a question of whether the licensee wants you to or not,” says Holmes.

“My advice to them is to ask their licensee to terminate their appointment as an authorised representative right now and let them provide advice as an employee only.”

Advisers can still provide financial services under the employer’s license. Their employer might need to make an amendment to their employment agreement, but Holmes says it doesn’t take much. “What all licensees should be doing is reviewing their advice documents…so that they can comply with FoFA. And in doing all of those things they can be removing references to the AR number and better explain the basis on which their employed advisers are authorised to provide advice under their license. All those changes are relatively minor.”

However, not all licensees will be willing to terminate the appointment so easily.

“If you think about the CBA situation, they might have thought it’s a good idea because then people who are really naughty advisers…those sorts of people who could’ve been found not to act in the best interests of clients, could be prosecuted separately to Commonwealth Bank.”

Holmes says that as employed advisers get wind of this issue, they might leave dealer groups that are prepared to expose them to that degree.

She says it is a matter of employers and employees having a discussion and coming to the right arrangement. “At the end of the day, [licensees] need to work out whether they should be putting their employees in that position in the first place.”

There is a reasonable defence to the fines if licensees have adequate FoFA compliance and implementation, and advisers follow their policies. And Holmes maintains that advisers managing their own portfolio should be authorised representatives and held liable.

More stories:

Bumpy road ahead for advisers

Professional leaders call for inclusion

TASA: Advisers still in disturbing state

 

  • BeyondaJoke on 12/06/2013 4:17:43 PM

    Seriously it is not the financial services, industry that needs to targeted . It is the legal eagles that need to be brought in to line and heavily regulated to stop them suffocating this industry. They are the root of all evil with their constant fear mongering that they constantly spread. The legal "profession" need to have their fees capped to curb their greed and own self interest that causes the problems that all decent, hard working, honest, financial advisers have to suffer. Why don't they seem, to pick on the Real Estate industry for a change ? There is a lot of advice involving big $$$ that is provided to investors and clients alike, which seems to fly under the advice radar, including the loophole of not having to produce advice documents? If the Unions had their snouts in that industry trough I bet there would be some changes! Hmmm

  • Fedup on 12/06/2013 9:48:58 AM

    I am counting the days to Labors demise. Why can a person go to an Super fund directly and get "general Advice" with no soa and no liability to the fund. It is the good old irrational Labor thinking. We cant offer advice under this system. Because it is dangerous. There are a lot of issues to consider with advice. I have seen clients lose $100,000s because they got "general advice" for "free". It cost them much more than the free advice.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions