The Association of Independently Owned Financial Professionals has selected DASH as the platform partner for its white label platform, after InterPrac Financial Planning advisers faced industry blacklists.
The creation of the association-owned platform, Foundation Adviser Wrap, was due to blacklists against InterPrac Financial Planning advisers after Macquarie and Netwealth restricted access to the licensee’s authorised representatives after settling legal proceedings with ASIC and remediating Shield and First Guardian investors.
However, other major platforms that didn’t onboard the funds – HUB24, CFS, BT and AMP North – all commenced similar blacklists with Insignia Financial being the only platform with over $100 billion in assets under management not placing any restrictions on InterPrac advisers.
Netwealth’s announcement that the platform changed its terms and conditions to communicate directly with clients further aided the association’s concerns. However, Professional Planner understands Netwealth did so due to regulatory pressures in the aftermath of the First Guardian collapse.
DASH’s trustee is Equity Trustees, which is being sued by ASIC in two separate proceedings for onboarding Shield and First Guardian. DASH’s Super Simplifier held the Shield Master Fund.
Platform industry veteran Arthur Naoumidis and founder of Praemium conducted a multi-month review of potential platform partners which led to the selection of DASH.
Under the model, advisers will retain access to the platform while client assets remain in place; access may only be denied on a “for cause” basis, including regulatory or disciplinary action; and any such restriction will apply only to the individual adviser, not entire licensee.
AIOFP has established a new entity, Foundation Platform Services, to aid with the rollout of the platform, which will be majority-owned by the association with Naoumidis appointed as CEO.
Naoumidis tells Professional Planner that any profits generated from the platform operation will be directed toward enhancing member services for the association.
“This may transform the association’s financial capacity to deliver member services,” Naoumidis says.
One of the initiatives under consideration is the establishment of an adviser defence fund to assist members requiring legal or strategic support with disputes from larger institutions.
“The structure and operation of the facility — including whether it takes the form of enhanced PI support, a litigation reserve, or another mechanism — along with governance and case approval processes, will be developed over the next 12 months as the white label platform builds scale,” Naoumidis says.
Garry Crole, the under-fire managing director of InterPrac owner Sequoia Financial Group, sits on the board of the AIOFP as a non-executive director.
Since the platform blacklists were announced, Sequoia has attempted to sell InterPrac. with a $50,000 deal with unknown entity Conquest Investment Partners falling through.
Research from Padua Wealth Data shows InterPrac has lost 110 advisers since the start of the year, dropping from 282 to just 168.
Despite an agreement being made with Avalon FS to help InterPrac advisers switch licensees, Wealth Data has found advisers moved to a range of licensees including larger players like WT Financial Group, Lifespan and Centrepoint, as well as a broad range of smaller licensees in the 20-99 adviser range.
The regulator has taken court action against both the Shield and First Guardian funds and directors, as well as lead generators and advisers allegedly responsible for rolling investors into the managed investment schemes.
However, it was two InterPrac advisers – Ferras Merhi and Rhys Reilly – that ASIC alleged were central to the distribution of the funds with the former taken to court and the latter being banned for 10 years.
ASIC has taken InterPrac to court over allegations it failed in its oversight responsibilities of Merhi and Reilly.
ASIC has alleged Merhi signed 6000 Statements of Advice within a three-year period, used marketing companies to push potential clients to his financial advice businesses while receiving nearly $18 million in upfront advice fees and $19 million from entities associated with the funds to market them, and received inflated loans from the fund to help purchase his businesses.
Several other licensees have been cancelled for their involvement in the distribution of the funds and InterPrac is currently the only solvent licensee implicated in the collapse of Shield and First Guardian.
The regulator has taken SQM Research to court for providing insufficiently rigorous research reports about the funds.
Editor’s note: Geoff Lloyd is chair of Conexus Financial, publisher of Professional Planner, and DASH.
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