AFSL acquisitions loom in grandfathering equation

Financial planning companies looking to avoid the fall-out from the changed grandfathering arrangements can do so via the acquisition of Australian Financial Services Licences (AFSLs), but the risks and costs might be higher than they are willing to meet. 

That is the assessment of two dealer group heads - Premium Wealth Management’s Paul Harding-Davis and Paragem’s Ian Knox, both of whom suggested that the acquisition of a licence would not trigger the changes to client status which would curtail the grandfathering provisions for individual planners. 

However both men said that companies looking to acquire AFSLs would need to be prepared to devote considerable time and money to undertaking appropriate due diligence in the knowledge that they would be acquiring any problems attaching to the licence. 

“It represents a way of dealing with the grandfathering issue, but it can entail some big risks which in turn would require some significant due diligence,” Harding-Davis said. 

Knox said such an approach would impact the carrying value of an AFSL and agreed with Harding-Davis that considerable due diligence would be required to effectively avoid purchasing any problems associated with a particular licence. 

The key financial planning organisations are continuing to lobby the Treasury over the grandfathering provisions, arguing that on the current interpretation the provisions are anti-competitive.