Advisers risk being 'locked out' of client data
Advisers who have switched to a paperless office could be putting their businesses at risk if access to the data storage system is refused at some point.
In January, when Storm Financial failed, its advisers were denied access to their client records as software provider Ignite was in dispute with its associate company.
It is understood that access to that data is still being refused, although negotiations are underway.
In recent years, advisers have been encouraged to move to a paperless office and platform providers have actively pushed dealer groups to store their client data on the systems.
Deacons senior associate Michael Park said advisers needed to ask the platforms what access they have to their data if there is a problem.
“This should be regardless of any contracted rights the adviser has to the data,” Park said.
“The adviser should be looking for some sort of dispute resolution arrangement.”
Bartier Perry executive lawyer Matthew Crouch agreed dispute resolution should be considered when signing agreements on data systems.
“When we speak of dispute resolution clauses, we usually refer to arbitration and mediation clauses,” he said.
“These can be useful up to a point, but it’s important to ensure that the contract contains appropriate practical provisions if the adviser is in dispute with a company that manages or stores the information that is critical for continuity of the business.”
Crouch said there has to be written provisions ensuring the adviser is not ‘locked out’ of their own data.
Holly Nethercote financial lawyer Ian McDermott said access to the data should be included in the authorised representative agreement signed between the adviser and the dealer group.
“That is what we advise to cover access and ownership of the client data,” he said.
“There are three different parties involved in the agreement — the client, the adviser and the licensee — and all have to be included.”
Recommended for you
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
As advisers seek greater insights into FSCP determinations, what are the various options considered by the panel and can a decision be appealed?
Amid the current financial adviser shortage, advice firm Link Wealth is looking to expand its financial literacy program for high school students across the country.
