Synchron and Lander & Rogers rally to protect the livelihood of financial advisers

Leading licensee, Synchron and respected law firm, Lander & Rogers are rallying to protect the interests of Australian financial advisers by seeking amendments to the Corporations Law Act (the Act) to allow financial advisers to receive payments directly from providers.

“As it currently stands, the Act imposes a particular business structure on financial advisers when they act as authorised representatives of an Australian Financial Services Licence holder or Licensee,” says Synchron director, Don Trapnell. “One of the outcomes of this arrangement is that Licensees, not advisers, receive payment from product providers for the work done by advisers, who then pass the payment on to advisers – often in their good own time.”

Synchron has partnered with Lander & Rogers to make a joint submission to Treasury to amend Section 911A of the Act, which Mr Trapnell says currently exposes financial advisers to risks over which they have no control.

“At the moment, if a Licensee is placed into liquidation their advisers have to compete with other creditors for payment of their services,” he says. “This seems very unfair given that advisers have already provided the services to clients and product providers have already paid the Licensee for those services.”

The joint submission to Treasury notes the collapse of AAA Financial Intelligence in early 2013 which resulted in losses to advisers of a reported $300,000 and the collapse of Australian Financial Services, which was formally wound up in May 2013, which resulted in losses to advisers of a reported $1.5 million.

The joint submission proposes that licensees be regarded as agents of advisers for the purpose of collecting fees and commissions.

“We believe Licensees and their advisers should be free to adopt whichever business structures best suits their commercial circumstances,” says Lander & Rogers partner, Ruth Stringer. “We also believe the law can be amended to overcome this problem without disturbing the consumer protection provided by the Act for clients.”

Mr Trapnell says Synchron generally welcomes the Federal Government’s proposed amendments to the Future of Financial Advice (FoFA) legislation and regulations under the Act, many of which are designed to alleviate some of the costs associated with the regulation of the financial advice industry, while retaining core consumer protections.

“We are encouraged by the Government’s goal of ensuring that Australians have affordable access to a well-functioning financial advice market,” Mr Trapnell says. “Our proposed amendments to the Act will ensure that advisers are not subject to risks over which they have no control.”