Planners should scrutinise potential licensees

A week after members of a Senate Committee pointed to the need for financial planning licensees to do compulsory due diligence on financial planning recruits, a compliance specialist has urged planners to do equal due diligence on any licensee they choose to join.

Catalyst Compliance managing director, Steve Murray has suggested that if financial advisers get it wrong when they join a licensee, the consequences can cloud their reputations for many years.

He said reputable AFS licensees had attempted to protect their licence by avoiding the authorisation of advisers employing sub-standard practices but it was now evident that advisers needed to be equally as careful in their selection of a licensee "as they may turn out to be a threat to the adviser's reputation and their professional future".

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Murray said that it was unfortunate fact that most advisers were not diligent enough in scrutinising licensees and that their investigations were usually very shallow and confined to two issues - "how little will I have to pay to be authorised, and how little will the licensee interfere with the running of my business".

"Perhaps advisers should also think about what that licencee will look like on their CV in the future," he said. "Irrespective of the fact that an adviser has a blemish-free history, an association with a troubled AFS licensee can be enough to convince a new licensee to avoid that adviser — they don't know whether the adviser was one of the "bad" advisers or not and are not willing to take the chance."

Murary said AFS licensees were avoiding advisers whose CVs included licensees such as AAA, Morrison Carr or Storm and that "even Commonwealth Bank is no longer a plus on an adviser's CV".

Murray and Australian Capital Financial Planning managing director, Barry Parker suggested there were a number of steps planners could take to overcome the problem including accepting that low cost business models did not always represent the best outcome, asking for the latest licensee review, and talking to other advisers in a dealer group.




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