Specialist consultancy a potential solution for older risk advisers

Older, experienced risk advisers could have an alternative path to stay in the industry without fulfilling the education requirements, as the Australian Financial Advisory Network (AFAN) plans to take on risk advisers as consultants.

Craig Ball and Ian Macpherson established the Australian Financial Advisory Network (AFAN) as a co-op of specialists (i.e. aged care, estate planning, risk, retirement and financial planning, commercial and private lending, and general insurance) and authorised planners who would provide a business platform that allowed risk advisers to remain in the industry.

Advisers had until 31 December, 2021, to pass the Financial Adviser Standards and Ethics Authority (FASEA) exam to be able to continue to operate and give advice.

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“Obviously some will be able to sell their books and I expect, be more than happy to leave, however many will be left without a buyer simply because of the volume of sellers in the marketplace,” Ball said.

“Given that they will no longer be authorised to give advice, by joining AFAN they can still continue to work with their clients as an AFAN Consultant.

“They can sit in on client reviews with one of AFAN’s authorised representatives, they can make factual statements about the client’s insurance contracts, they can assist with claims ad administrative enquiries etc. The only thing they cannot do is say ‘I recommend’.”

The ex-risk adviser, now consultant, would maintain the client relationship.

“Many have built a very trustworthy relationship with their clients over decades in some instances,” Ball said.

“If we were to simply purchase their book then it would take us years to emulate that and as you would be aware, the drop-off rate of clients during any business takeover is relatively high.

“Maintaining the relationship via the ‘consultant’ ensures a far higher persistency rate.”

AFAN would remunerate consultants by passing on 70% of the ongoing trailing income and each consultant who joined was guaranteed of receiving this trailing income for a minimum of five years.

“Ideally we want our consultants to stay for a longer period of time, but even when they do decide to retire they then become members of our AFAN Community,” Ball said.

“The AFAN Community allows our retired advisers to continue to pass on their knowledge and expertise to young planners coming through the ranks.”

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The big problem with these models in which an experienced ex adviser who is not FASEA qualified works with a fully qualified younger adviser, is the pressure that will potentially be put on the younger adviser to do something which is not aligned with the FASEA Code. Younger advisers will be put in an awkward position where their boss is directing them how to advise, but they will be the one who is responsible for that advice. It could cost them their careers.

Well put anon.

The deal for the licensed adviser can be summarised as "I'll take the lion's share of the revenue, you take the lion's share of the liability"

fasea code 1: standards of ethical behavior, "you must act in accordance with applicable laws, including this code, and NOT TRY to avoid or circumvent their intent"

define Intent: intention or purpose

define Avoid: keep away from or stop oneself from doing something

define Circumvent: find a way around (an obstacle) that is, the fasea exam and education requirements

Putting it all together, it appears to be a scheme to avoid having to sit the fasea exam and education standards. aren't we all complaining that non-qualified accountants* who are not appropriately educated to our high standard are giving off-the-cuff financial advice?

and yes, I have a masters degree in financial planning and have passed the fasea exam

* non-qualified accountants are accountants who do not have a bachelors degree or higher award in financial planning and have passed the fasea exam

Can't see how these arrangements work. We all know how client conversations go, they want an answer immediately, there's no way the experienced Adviser is going to defer all questions of any substance to the junior adviser, they'll look like a goose. Inevitably they will be providing advice and when the complaint comes they won't have a leg to stand on.

see above my earlier post, It is a scheme designed intentionally to avoid or circumvent the fasea code of ethics and education standards.

The experienced adviser may answer the question in the meeting, but the junior adviser will then incorporate that answer into an SoA/RoA with their own name on it. The junior adviser is the one who will be legally liable for any complaint. If they try to get out of it by saying "I just wrote what the experienced guy told me to", that is an admission they have failed in their professional responsibilities. They will then be found guilty regardless.

Verbal advice is still advice. If the experienced Adviser provides any type of recommendation or even an option regarding their insurance, then they are providing advice. I understand the technicality around who's name appears on the advice document but if you have a number of clients complain or ASIC does an audit and it's found that they are all reporting that the experienced Adviser is sitting in meetings giving recommendations, then they're stuffed.

Nothing like try to circumvent the FASEA code hey! The old Adviser should get out the way, and let the actual qualified adviser do their job.

i am afraid i agree. It is going to be looked at as a breach of Code 1 of the FASEA codes.
As much as the idea sounds effective i feel it gives older advisers like myself a bit of false hope that we may be able to somehow remain effective in the industry.
Needs a lot more work on it along with some ASIC written approvals.

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