Authorised rep pay reform proposed

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.