BT, AMP platforms ban InterPrac over Shield and First Guardian fallout

BT and AMP have joined the list of platforms that are banning new business from InterPrac Financial Planning advisers in the aftermath of the $1 billion Shield and First Guardian collapse.

The licensee, owned by ASX-listed Sequoia Financial Group, is being sued by ASIC and was responsible for authorising Ferras Merhi who the regulator alleges signed over 6000 Statements of Advice in a three-year period while under the authorisation of the licensee.

A letter from Sequoia head of licensee and adviser services Daryl Stout sent to advisers seen by Professional Planner says that BT will cease permitting the distribution of new products and services to InterPrac on the Panorama platform effective 13 February, while AMP’s North ban will kick in from 27 February.

“As part of our governance processes to protect clients, we monitor adviser activity and engage with licensees to ensure they meet our requirements,” an AMP spokesperson said.

“While we have seen no evidence of detriment to clients on our platform, we took the precautionary step to cease accepting new advisers and new business from InterPrac to ensure our standards continue to be met.”

It follows a report from The Australian this week that Colonial First State has made a similar ban of InterPrac advisers.

An InterPrac spokesperson confirmed that BT, AMP and CFS have all ceased allowing new InterPrac business on their platforms, but that existing arrangements remain unaffected.

“InterPrac is engaging with the Colonial First State platform trustees and others noting its long-term positive relationship, strengthened compliance and risk management processes, and ongoing cooperation with regulatory organisations,” the InterPrac spokesperson said.

“InterPrac remains committed to protecting the interests of its advisers and their clients.”

InterPrac confirmed last year Netwealth and Macquarie had banned new business from InterPrac advisers.

Seqouia managing director Garry Crole has also advocated for platforms to ask for government assistance to bail out affected consumers.

The changes from AMP and BT don’t impact existing client accounts. The licensee said business will continue with HUB24 and MLC Expand and that advisers can continue to use any other APRA-approved products that have not made changes to their distribution agreements with InterPrac.

“If you currently have pending new business where advice has already been provided and you may not meet these deadlines, please liaise with your local BDM to discuss potential solutions,” the letter said.

“Alternatively, you may wish to consider reissuing the advice with an alternative provider where appropriate. We appreciate this may cause some inconvenience for advisers and clients. Please be assured we are actively working with both providers on potential resolutions.”

Padua Wealth Data reported last week that Sequoia has seen 55 advisers depart since the start of last October.

Of the 55 that resigned, 40 were reappointed with 14 moving to Centrepoint Group, four to Lifespan, three to Advice Evolution and 14 to different smaller licensees.

ASIC has alleged in court that Shield and First Guardian paid Merhi or entities associated with him for marketing, including the lead generation services that funneled clients into those investment products.

The regulator has also alleged in court that InterPrac were aware there were instances where the lead generators discussed the products with potential clients.

AFCA determinations show that lead generators were receiving part of the advice fees and in some cases, an investment manager for Shield was the lead generator.

APRA reviewed platform trustees last year in the wake of the Shield and First Guardian collapse telling the industry that governance standards needed to be lifted.

APRA chair John Lonsdale told a Parliamentary committee hearing on Wednesday evening that the review covered 95 per cent of platform products or 17,000 in total.

He added that the responsibility of the prudential regulator isn’t to examine each product on a platform, saying it is the responsibility of trustees.

“What we do is set rules for how those products are onboarded, the monitoring that needs to happen and how they’re offboarded,” Lonsdale said.

“We are in the rules setting space and we expect trustees to adhere to those rules. When we’ve taken enforcement action what we’ve found is trustees are not at the level that we need them to be at.”

However, this application of the law will be tested in courts as Equity Trustees and Diversa Trustees have elected to fight allegations they failed in their due diligence roles as gatekeepers of investment products.

Macquarie and Netwealth have agreed to remediate customers to their original starting position before being rolled into the funds, avoiding protracted court proceedings that would delay any compensation to members.

The fallout and aftermath of the Shield and First Guardian collapse will be a core topic at the Professional Planner Advice Policy Summit on 23-24 February in Canberra. Advisers, practice principals and licensee executives are eligible to attend and can register here.