In January, FPA chair Julie Berry took action against Questor Financial Services regarding contractual arrangements between the group and her own planning business, Berry Financial Services.
The findings in the case led many to question whether advisers using a platform to manage their clients’ investment portfolios are effectively handing control of their business to the platform provider.
It appears, in short, that advisers need to make sure they understand the contractual arrangements between them, their dealer group, their chosen platform and their clients.
In the Berry case, Berry was an authorised representative (AR) of Executive Wealth Management – a sister Australian financial service licensee (AFSL) to Bridges and part of the then Australian Wealth Management Group, now IOOF.
The platform used by Berry while an AR of Executive Wealth Management was The Portfolio Service (TPS Platform), the trustee of which is Questor Financial Services, also part of IOOF.
In July 2009, Berry resigned as an AR of Executive Wealth Management to join Comcorp, which had agreed to purchase 40 per cent of Berry’s business.
Berry followed the usual procedure when a financial planner changes AFSL and obtained a signed letter from each of her clients confirming she would continue as the nominated financial planner under the Comcorp AFSL.
The letters were provided to TPS. Though, instead of redirecting the adviser service fees to Comcorp to be paid to Berry, which was argued is standard industry practice as well as consistent trustee behaviour, the trustee decided to cancel the adviser service fees and wrote to all of Berry’s clients informing them of their decision to cancel the fee.
Berry then took action against Questor in a bid to have the adviser service fees reinstated and paid to Comcorp. The court found she subsequently failed on all four counts.
The implications of the case are far reaching and should give everyone in the financial planning industry cause to be concerned.
The case should be a call to action for all financial planners and dealers alike.
Where do advisers stand if their platform provider decides it wants to cancel their adviser service fees and no longer do business with them?
It would appear that most of the major platforms now have the discretion to cancel the adviser service fees at any time. So much for adviser service fees being a matter between the client and the financial planner.
It is clear from the case that trustees of platforms may, if their contracts allow, put their own commercial interests before the interests of the members of the fund and the financial planners that have supported them over many years.
Planners and licensees should ensure their contracts and the relevant platform product disclosure statements protect the value of their businesses and the interests of their clients.
