AFS Group on brink of wind-up

As reported by ifa yesterday, BDO administrators Rachel Burdett-Baker and Luke Targett have been appointed to AFS entities AFS Group Limited, Australian Financial Services Limited, MDA Private Pty Ltd and Strategy Portfolio Limited pursuant to Section 436A of the Corporations Act 2001.

The announcement follows a lengthy period of speculation about the group’s future, sparked by an email from AFS chairman Barry Stephen to stakeholders, seen by ifa in March, which suggested the group was facing voluntary administration should shareholders in the group’s wrap administration service, Strategy Portolio Limited, exercise their put options.

"At the current time it is the view of the directors that AFS is able to pay its debts as and when they fall due," the email stated.

"However, this may not be the case if all SPL shareholders exercise their rights under their put options."

Should a material proportion of SPL shareholders put their shares, the directors of AFS will carefully review the group's financial position.

"This may result in the directors placing the company in voluntary administration," the email said.

Yesterday's statement from administrators said AFS Group has been “actively working with advisers with respect to a transfer to alternate licensees” and that BDO will be helping facilitate this transfer going forward.

However, it has become clear that many AFS authorised representatives have already jumped ship.

ifa understands that 15 advisers have been confirmed as joining ANZ’s One Path network and that other financial service providers such as BT Financial Group have been showing interest in providing a home for fleeing AFS advisers.

Practice broker Stephen Prendeville even speculated that the 7 per cent of respondents to an ifa straw poll who receive approaches to sell their businesses weekly or more are most likely operating under the banner of a beleaguered licensee, singling out AFS Group as a likely possibility.

“It’s widely expected that AFS will be handing back their licence at the end of this month,” he said. “Imagine if you were a principal owning a practice under that dealer group – everyone would have approached you.”

While full details of the financial problems faced by AFS have not yet emerged, the administration may well be a further indication of the increasing operating difficulties of non-aligned licensees.

In March, Pinnacle Practice director Anne Fuchs told ifa the number of well-established non-aligned licensees is now “so small I can count them on two hands and have fingers left over”. With the appointment of administrators to AFS, that count will almost certainly now decrease further.

However, amid the reports of an adviser exodus and impending voluntary administration, there are some glimmers of hope.

The BDO statement makes clear that while the ultimate decision about the group’s future is still forthcoming and will depend largely on the position of creditors, the administrators will now be now be assessing the financial position of AFS and its future viability.

And at least one long-time AFS authorised representative, speaking on condition of anonymity, will not be joining a competitor just yet.

“I’ll be backing AFS to the hilt,” he said. “I’m not going anywhere.”