Sequoia plots market share expansion amid Libertas anger

Sequoia, which has recently come under fire over its decision to put Libertas into administration and potentially create a flow-on impact on advisers through the Compensation Scheme of Last Resort (CSLR), has announced it plans to further expand its number of self-employed advisers under the Interprac brand.

In its annual financial statement filed with the ASX on Tuesday, the firm declared that “the thematics for the adviser industry are attractive”.

“The rapid decline in the number of advisers since the royal commission has begun to slow in recent years with adviser numbers now steady at around 15,600. This has seen the number of recurring clients per adviser increase across the industry by between 15–20 per cent,” Sequoia said.

“Advisers have become more efficient and have embraced technology and increased the use of outsourced services such as those offered by Sequoia. Fewer advisers have been moving to self-licensing models.”

The firm said that this positive sentiment has increased its confidence regarding its own market share and future revenue.

“We are winning market share from other licensors, particularly when advisers are disappointed with the consolidation of the industry occurring,” Sequoia said.

“In 2024, we had 70 new advisers join the AFSL and whilst we did see 56 depart, most of the departures were from non-economic practices who closed or merged their businesses rather than leaving us to join a competitor.

“In our case, the retention rate of advisers of a scale we see as commercial using our services and accountants using our legal and document business has been very high. This gives us confidence around future revenue allowing the business to invest with greater confidence.”

Earlier this month, the Australian Securities and Investments Commission (ASIC) announced a CSLR payment had prompted it to cancel the AFSL of Libertas Financial Planning.

Libertas, which was acquired by Sequoia Financial Group in August 2019, went into liquidation in May 2023. In a statement at the time, Sequoia said it planned to consolidate AFS licences, with management making the decision to transfer Libertas’ operations and customers to Interprac Financial Planning and Sequoia Wealth Management.

An Australian Financial Complaints Authority determination (AFCA) had previously been made against Libertas on 24 July 2023, but this was not paid by the firm. As a result, the CSLR paid an unspecific amount of compensation to the person on 24 July 2024 and notified ASIC, which prompted the cancellation.

This is the first time that ASIC has cancelled an AFSL following a payment of compensation by the CSLR.

Speaking to ifa on Wednesday, Garry Crole, CEO of Sequoia, said the firm's decision to close Libertas had nothing to do with the CSLR.

"The Libertas AFSL was no longer viable to run, and we wrote to all advisers in February 2023, more than 18 months ago giving them a reasonable notice period the AFSL would be closed in 2023 and if they wished to join another of our AFSL they could do so but under new terms of engagement where the provision of a service was commercial," Crole said.

"Once all advisers had transferred to a new AFSL and there were no complaints that we believed to be still open we appointed a receiver and asked for the AFSL to be cancelled."

Crole explained that Sequoia believed there to be no cases at AFCA to address, including the case in question.

"The case manager at that time had ruled in our favour and we had offered a settlement which the customer declined," he said.

"The receiver has been trying to cancel the AFSL for some time, and news ASIC had cancelled the AFSL for the reasons reported came as a surprise given the receiver's attempts to previously close the AFSL."

At the time that the AFSL was cancelled, Financial Advice Association Australia general manager policy, advocacy and standards Phil Anderson took to his LinkedIn to say that the Libertas licence cancellation highlights the “ongoing issues with listed companies walking away from advice subsidiaries and placing them into administration”.

“Whilst at present, it is only one case that has been paid out by the CSLR, potentially there will be more. AFCA data demonstrates a history of complaints for this licensee over recent years,” Anderson said.

“Will the advice profession now be expected to pick up the cost of a bunch of these complaints? Why did Sequoia Financial Group put Libertas Financial Planning into liquidation and why did they avoid paying out on this AFCA determination? Does this suggest that we should expect a lot more CSLR payments to follow?

“This is not right and should not be allowed to be repeated."

However, Crole insists that Sequoia did nothing wrong.

"Sequoia believes the CSLR recovery program is legislation that needs review and is driving up the cost to the consumer, adviser and AFSL and believes the minister Mr Jones needs to listen to the industry and make changes immediately as to its current status," he said.