Licensees agreement could reopen adviser movements
Advisers can still move between licensees and retain trail commissions but would need to rely on their former licensee acting as ‘a good corporate citizen' and continuing to pay advisers no longer in their advisory group.
Claire Wivell Plater, managing director with legal firm The Fold, said advisers could appealing to the better nature of licensees to pay trail commissions to departed adviser despite strong business reasons as to not proceeding down this path.
"It would make the licensee a good corporate citizen but that doesn't necessarily mean it makes good commercial sense for them and there are significant risks for the adviser if the licensee strikes financial difficulties," Wivell-Plater said.
Rather Wivell-Plater said the grandfathering amendments, which were part of the wider Future of Financial Advice amendments that were disallowed in the Senate last week, should be allowed to stay.
"This is a win/win/win situation — it's a win for advisers because they will not lose a revenue stream they earned under the prevailing rules of the day. It's ultimately a win for licensees because it will allow each to compete on its own merits in the battle to attract advisers. It's also a win for industry sustainability because it avoids wiping significant value off adviser businesses with the stroke of a parliamentary pen."
"I can't see how advisers whose trail commissions are a significant part of their income could afford to wear that loss, which means they will be forced to stay where they are — even if they're not being well supported by their licensee, or worse still are in dispute with them."
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