Salaried advisers and the lack of client ownership

The salaried financial advisers who have signalled their desire to move to self-employed status are doing so because they want genuine ownership of the customer relationship. 

That is the bottom line of a Money Management survey which has revealed that, given their preference, a significant majority of respondents who are salaried financial planners would prefer to be self-employed and working in a self-licensed capacity or as an authorised representative (AR). 

At the same time, industry executives said there was absolutely no doubt that salaried advisers did not technically, legally own the relationship with their clients irrespective of how long they had been servicing them. 

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What is more, salaried advisers were usually subject to restraint clauses within their employment contracts which precluded them taking clients with them when they changed employers. 

The majority of salaried advisers had been employed by superannuation funds and the major banks, but that had begun to change as a result of the banks exiting wealth management 

Association of Financial Advisers (AFA) general manager, policy and professionalism, Phil Anderson pointed to the decline in the numbers of salaried financial advisers which had accompanied the exit of the banks. 

He said that, traditionally, employment as a salaried adviser had often represented a pathway to self-employed status and he believed this would continue to be the case in many instances. 

However, Anderson said that there would always be a cohort of advisers who were content to work in a salaried environment where, notwithstanding not ‘owning’ their clients, they were not subject to many of the issues which confronted self-employed advisers. 

While the exit of the major banks has reduced the numbers of salaried advisers, major players such as IOOF have been signalling their intention to grow salaried adviser numbers with its latest results announcement confirming that the Bridges network would be transitioned to a fully salaried network. 

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I think the unanswered question whether as a AR you own your clients. Putting aside the argument on whether it's possible to actually own a client in the first place, anyone who's ever switched licensees would remember that the current AFSL has to agree to release the clients. We've always assumed for decades that we own our clients as self employed advisers under someone else's license. Has this ever been true?

Depends what it says in your AR contract Duke. Some contracts explicitly state that advisers own the clients and can take them with them if they leave. Some contracts (eg AMPFP) state that the licensee owns the client and the adviser cannot take them, and cannot even approach them after they leave. If it's not in the contract then it gets a bit grey.

It really depends on your AR contract. Under some I’ve read, no the AFSL would win the argument that they own them. Under other agreements the revenue base is deemed to be the property of the adviser so therefore it’s their asset. Either way I think the future is bright for salaried advisers. I’m trying to work on a model now to bring in a young adviser on a service contract to help with some of the lower touch, or lower revenue clients. My initial thoughts are I’ll pay them say 50-60% of the revenue to service a certain level of fees over umpteen years, meanwhile they build their own base. After say 4 years they can use the equity they have built up plus the 50% of exiting clients I’m handing them to get a loan and take a stake in the business. Kind of a vendor finance agreement but we receive a lump sum on the back end for say 1x revenue for the clients I’ve given them. Risks are of course they take the clients and bugger off, but that’s a risk with any salaried adviser I guess.

If your clients want you they will follow you be it salaried or self employed. Its the advice relationship they want, the products themselves come second. I can tell my clients to roll out of a fund to another, they trust me so they will do it, no matter if its amp , cbus or whoever. They know if they come to me product always comes second. They will sign a new adviser form if I leave my dealership and they want to play hard ball. This is the strength of the long term client adviser relationship. Most of the execs at these instos are that far up themselves they cant see that. Yes no one owns the clients but they who own the relationship are the ones clients will follow.

Yes, sooner or later it will dawn on the Adviser Organisations that permitting the intra-fund "adviser" legislative carve-out is a horrific step backwards into the 1980s tied agency institutional control of the market place. Little wonder the FSC & the big insto FPA silently support it. This is why Intra-fund "advice" legislation must be brought into line with untied retail advisers. No more unlevel playing fields.

Off topic much??? The article is referring to salaried advisers taking their clients with them to be self-employed and we get you don't like intra-fund advice (which is now ad nauseum), but really mate, you need to drop the one-trick pony stuff. This client ownership issue is a real problem as some of my clients followed me when I moved to a small practice and the licensee (which bank?) sent me threatening letters!!!

1. why would you want be self employed now with all the risks associated with it?

2. just ask a fund manager or insurer who they think owns the client? Possession is 9/10 of the law. We entrust our clients to them and they become theirs.

If you are self employed at least you have some freedom, no oh you do 10 meetings a week, whats the pipeline, kpis etc. You can also have some freedom in what products you offer. If you are employed not only do you have someone thats probably never advised anyone trying to manage you so they can make thier wages, you are forced to act the way they want you to, offer thier product only etc. You are still on the hook for the advice you give either way personally. So why work for a product ? You think they will help if you get a personal complaint about you go to afca? Id much rather do what i want when i want with whom i want, as we are all on the hook personally for the advice we give it better be defensible. Putting every client into a in-house product or ignoring that product to tinker around the edges isnt defensible..

Self licensed advisers have some freedom, but not self employed advisers operating under an AR. They have the illusion of freedom, but their licensee can turn on them at any moment. Too many ARs have found out too late that their licensee has enormous power over them. (Some of it legal, some of it not. But power nonetheless.)

Far too risky being an employed Financial Planner working in a call centre etc etc. The words best interest obligations are skipped over in the training/ boiler room of any Industry Super fund.

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