Speaking to InvestorDaily, Synchron director Don Trapnell said the biggest debt that licensees have is the debt to their authorised representatives as they pay half monthly in arrears.
“Do you know what that really means? It means they hang on to the adviser’s money for a minimum of two weeks and a maximum of four weeks, depending on when the money is paid to the licensee by the product provider,” Mr Trapnell said.
“Synchron has a turnover of about $38 million,” he said. “So if we paid fortnightly in arrears, that would mean we’d have about $3 million sitting in our bank account at any given point in time.”
According to Mr Trapnell, Synchron is the only licensee that pays daily commissions, part of its debt free stance.
“When we established the company back in 1998, one of the first things we did was say ‘let’s make Synchron debt free’,” Mr Trapnell said.
“And what is the biggest debt that licensees have? It’s the debt to their authorised reps,” he said. “That was shown when AFS went down and when AAA went down – that there was a debt to advisers of monies that were sitting in that two-week period.”
Daily commission payments are a critical part of Synchron’s value-add, Mr Trapnell said. “We don’t hang onto our advisers’ money,” he said.
“When we get paid and we know who to pay – in other words, we’ve got the money in from a product provider and we’ve got the statement in to say who to pay it to – we pay it out. It’s as simple as that.”
Despite achieving 12 per cent growth in Synchron’s adviser numbers in 2013, FOFA’s grandfathering provisions ensured that number fell well short of its potential, Mr Trapnell said.
Synchron was forced to halt recruitment from 28 June 2013 – when Bill Shorten announced the changes to grandfathering legislation – onwards, he said.
“Of all the changes of FOFA, grandfathering was the one that sent a very clear message out to Australians about free enterprise systems and about our methods of trading in Australia.
“That legislation embodies a restraint of trade,” he said.
The licensee was forced to turn away six reps last year, but was able to take on a number of reps with smaller levels of grandfathered commission by quarantining their commissions.
The commission will be paid out once FOFA amendments are legislated, Mr Trapnell said. “It had to be changed, and we are very thankful the new minister Arthur Sinodinos actually did take that on board and has announced the changes that are going to occur.”
