Don Trapnell

WT Financial Group Limited (WTL) has announced the acquisition of high profile, non-institutionally-owned licensee, Synchron.

Synchron founders Don Trapnell and John Prossor will continue working in the business with Mr Trapnell assuming the role of chairman of WTL’s Synchron subsidiary.

The move follows WTL’s acquisition last year of the Sentry Group and continues the listed company’s growth strategy. The WTL adviser network, which also includes the licensee group, Wealth Today, will emerge with more than 600 advisers and increase funds under advice to in excess of $16Bn following the Acquisition.

The total vendor consideration for the Acquisition is up to $7.96M, payable over two years in a combination of cash and WTL shares, and subject to various terms and conditions.

WTL will assume liabilities of circa $3M and expects to incur transaction and integration costs of between $1-2M, bringing the anticipated total value of the Acquisition to $12-13M.

Synchron Director, Don Trapnell said, “Synchron has a long and proud history as a licensee that values its people. In the process we have built a strong, close community of advisers with a unique culture.”

Mr Trapnell said that WTL understands this culture and embraces the same values. “We thought very carefully about the cultural fit, and we are delighted that the Synchron we all know will continue,” he said.

“This is a pivotal moment in our history, one which will allow us to equip Synchron advisers for an exciting future in financial advice, while also positioning us for growth, and ongoing leadership of the industry as a licensee.”

The Synchron name will remain and all scheduled Synchron events will proceed as planned.

“As we move into a post-pandemic world, and new opportunities emerge, this is the right fit for Synchron, at the right time,” Mr Trapnell said.

WTL Managing Director, Keith Cullen, said the Acquisition cements WTL as the largest non-institutionally-owned, non-product-producing financial adviser network in Australia.

“It establishes the right scale of operations to enable us to provide the critical support that advisers in our modernised industry demand. The resulting scale will set the course for future expansion and more depth in our offerings for advisers,” he said.

“Thanks to the Acquisition structure, the Synchron founders will maintain investment exposure to Synchron by holding shares in WTL as we continue to advance as a leader in the Australian financial advice sector.”

Mr Cullen said WTL will be enhanced through the addition of Synchron’s state manager line, adding significant experience and resources to the broader group operations to support the Company’s advisers across its Wealth Today and Sentry groups.

Synchron’s NextGen program, which supports the professional development of younger advisers, will also be rolled out right across the group. The program has helped reduce the average age of Synchron advisers to 47.

“Synchron advisers will benefit from the rollout of WTL’s adviser education and training programs, its comprehensive practice management tools and programs, and its enhanced risk management framework,” Mr Cullen said.

With millennial inheritance from 2020-2040 forecast to reach $3,500Bn, superannuation assets expected to double by 2029, and the largest cohort ever to enter age care, Mr Cullen said demand for advice will continue to grow across Australia.

“The landscape within the financial advice sector has a strong outlook, and the synergies created from the Acquisition position us for further growth.”

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John Prossor

On first reading, Synchron cautiously supports the latest approach to Continuing Professional Development (CPD) put forward by the Financial Adviser Standards and Ethics Authority (FASEA), which was recently released for consultation via a legislative instrument.

Synchron Director, John Prossor said, “While we have yet to examine it in detail, on face value it appears reasonable. The increase in CPD requirements, from the current 30 hours a year to 40, will seem an impost to some advisers, however the requirement has been a fact of life for many years for those who hold the Certified Financial Planner (CFP) or Fellow Chartered Financial Practitioner (FChFP) designation. We therefore think 40 hours for all advisers is probably reasonable.”

Mr Prossor said what is a little surprising is the proposal that only 70% of CPD hours need to be approved by the licensee. “As a licensee we have the legal responsibility of ensuring our authorised representatives keep up with their ongoing education in areas that are relevant to them,” he said.

“This responsibility also extends to setting a CPD plan for each authorised representative every year by knowledge area and recording everything they have done. Given these responsibilities, we can’t see how we can ensure our authorised representatives keep up with their CPD requirements and not need to approve the other 30 per cent. However what FASEA means by that proposal may become clearer on a closer reading of the instrument.”

Mr Prossor also welcomed the proposed transition arrangements. “Our training year is March to February, and obviously we would have had difficulty changing our regime midstream but we are happy to from 1 March 2019,” he said.

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John Prossor

Financial advisers are demonstrating a commendable commitment to their profession in the face of considerable commercial pressure, according to Synchron Director, John Prossor.

“It is a testament to the commitment of financial advisers that they continue to provide their incredibly valuable service to their clients despite constant financial challenges,” he said.

Mr Prossor said that despite the reduction in income tax to 27.5% for companies with a turnover of less than $10 million, the reality is that self-employed financial advisers are generally faced with ongoing and escalating costs.

“Increased record-keeping requirements and the need to be able to fully demonstrate compliance with the Best Interests Duty obligations take time and time is money,” he said. “The cost of professional indemnity insurance continues to rise and this adds to the financial challenges, as will the introduction of the ASIC funding fee. Then there is the cost of software, ongoing training and product research.”

Mr Prossor said that in recent years, advisers have also been required to register with the Tax Practitioners Board (TPB), twice in many cases. “Advisers have to register individually and, if they own and operate a financial advice company, as a company,” he said. “That’s two lots of fees.”

To renew mandatory membership of the TPB, advisers must complete (or have previously completed) TPB approved courses in Australian Taxation Law and Commercial Law or be a member of a TPB recognised professional association, for example the Association of Financial Advisers (AFA) or the Financial Planning Association of Australia (FPA).

“Currently, most advisers opt for membership of a professional association which adds more to the cost of being in business,” Mr Prossor said. “Ultimately, however, advisers will have to undertake additional studies in order to meet the requirements of the Professional Standards legislation and this means even more time and more money.”

Mr Prossor said these costs are hitting home even before the first tranche of the Life Insurance Framework comes into effect. “LIF will be a reality in only six months’ time and will further impact adviser income,” he said. “And yet, we continue to see new and eager entrants to the profession. It’s reassuring and highly commendable.”

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John Prossor

A new company, Valant Capital, has been created to provide leading platform, investment and insurance solutions to the advisers of Australia’s largest non-institutional licensee, Synchron.

In a strategic decision made by the Synchron Board and in response to adviser demand, the investment solution offered by Valant Capital broadens Synchron’s value proposition to its now over 400 advisers.

Valant Capital is the distributor of the High Wrap Investment Account, Superannuation Account and Pension Account. Furthermore, ten Valant Capital model portfolios are available through the High Wrap platform.

John Prossor, Director of both Synchron and Valant Capital, says the inclusion of model portfolios delivers multiple client benefits and means Synchron advisers can focus on strategy rather than asset allocation.

“This strategic move gives advisers and their clients the trifecta – access to an additional, optional platform which offers very good model portfolios, great functionality for advisers and most importantly, savings for clients in the form of very competitive fees.”

Powerwrap Limited has been chosen as the High Wrap platform administrator and will provide a tailored version of its full service next-generation wealth management platform to Synchron advisers. Powerwrap is Australia’s fasted growing non-aligned platform and has approximately $5 billion in funds under administration.

“Powerwrap is delighted its platform service has been selected by Valant Capital,” says Powerwrap CEO Cormac Heffernan. “Valant has high expectations of the businesses they are involved with and we have undergone a comprehensive due diligence process with them to ensure they are satisfied with the range, quality and functionality of services we can deliver to them and their advisers.”

Lonsec Investment Solutions is the Asset Consultant to the Valant Capital Investment Committee for the model portfolios. There are five risk-based portfolios with different weightings to defensive and growth assets, and five sector portfolios representing Global Equities, Australian Equities, Australian Equities – income, Fixed Interest and Listed Property and Infrastructure.

Valant Capital Director Dr John Morrison says the selection of its relational business partners, Powerwrap and Lonsec Investment Solutions, was time-consuming but necessary requiring deep quantitative and qualitative analysis of potential joint venture partners.

“We are delighted with the outcome. The inclusion of Lonsec Investment Solutions and Powerwrap allows Valant Capital to provide optimal solutions for Synchron advisers and their clients at very competitive prices.”

The Valant Capital Investment Committee comprises John Prossor, Dr John Morrison and Lonsec Investment Solutions Chief Investment Officer, Lukasz De Pourbaix.

The broad investment menu of the High Wrap platform provides Synchron advisers with the ability to recommend to their client’s direct shares, managed accounts, managed funds and, of course, the Valant Capital model portfolios. The High Wrap platform also has the capability to report on non-custodial assets such as investment properties, art and other collectibles.

“We want to ensure that advisers have the tools they need and investors have access to the best possible platform with well-researched funds which they can access through a diverse range of model portfolios” Dr Morrison said.

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John Prosser

Leading non-institutional licensee, Synchron, has scored a significant win for Australian financial services licensees on the issue of payroll tax.

Synchron Director, Don Trapnell said the State Revenue Office (SRO) Victoria had assessed that Synchron was liable to pay payroll tax in relation to the commissions and fees it collects on behalf of some of its advisers. “The SRO’s assessment was that authorised representatives who do not employ two or more people are considered employees or relevant contractors for payroll tax purposes,” Mr Trapnell said. “The implications for Synchron and for licensees across the industry were enormous.”

The assessment meant that potentially all licensees would be liable to pay around five per cent payroll tax on the gross revenue of these authorised representatives, backdated seven years. “It would have meant a huge tax bill for licensees and had the potential to send smaller licensees broke,” Mr Trapnell said. “In effect, the SRO was trying to apply payroll tax in relation to the smallest of small businesses – advisers who have just started out, or those who choose not to employ anyone.”

While some other licensees had decided it would be easier to settle, Synchron felt an obligation to contest the SRO assessment. “As a substantial licensee, we felt we had an obligation not just to ourselves but also to the industry not to blindly accept the assessment given to us,” he said.

Synchron argued that its legal obligation to collect fees and commissions on behalf of authorised representatives, coupled with the fact that Australian financial services licensees are also legally required to provide other functions such as compliance, education and training, meant these authorised representatives were not employees or relevant contractors for payroll tax purposes.

In February 2014, Synchron requested the matter be referred to the Supreme Court and supplied significant documentation arguing its case. The matter was set down for trial in February 2017, however on 1 June, Synchron’s lawyers forwarded a letter from the SRO Victoria stating:

‘The Commissioner has determined on the basis of the evidence presented by your client that your client is correct, to contend that the arrangements between your client and its authorised representatives are not relevant contracts for the purposes of section 32 1(B) of the Payroll Tax Act 2007.’

According to Synchron director John Prossor, “We believe that’s the correct and just outcome from this matter, firstly for Synchron and for its authorised representatives, but also for the industry at large.”

The situation arose following the Harmonisation of Payroll Tax in Australia which saw the removal of a NSW exemption for authorised representatives of Australian Financial Services Licensees. “When the exemption was removed, the prevailing view was that it would have little causal effect,” said Synchron Independent Chair, Michael Harrison. “In reality, as soon as it was removed, the SRO jumped on the issue.”

Mr Harrison said the situation is also an unintended consequence of the Corporations Act which Synchron lobbied to have changed in 2014. “We teamed up with law firm Lander & Rogers to push for amendments to the Corporations Act which would allow financial advisers to receive payments directly from product providers,” he said. “Payments for advisers must be paid by clients to licensees who hold the money in trust for their advisers. We have seen two examples in our industry of licensees who went broke and liquidators took money owed to their authorised representatives because the licensees had no facility to hold that money in trust. It is one of the reasons why we pay our advisers daily.”

In a case spanning five years and costing Synchron more than $500,000 in legal fees, Synchron campaigned heavily on the issue, approaching industry bodies and prominent politicians. “Despite earning the sympathy of some high profile Ministers, politicians were unwilling to take any action that would impede the collection of state payroll tax,” Mr Harrison said. “We were largely on our own.”

Mr Harrison said the SRO’s assessment also ran counter to the Australian Government’s desire for business modernisation. “In today’s world advisers don’t have the same need to employ physical staff,” he said. “They use software and virtual assistants such as paraplanners who work within other organisations to do many of the tasks required in a financial advice business. The way we do business has changed with the times, but with its focus on the number of employees within a financial advice business, the SRO did not recognise this; it did not recognise these businesses as small businesses in their own right.”

Synchron sent a video on the issue to its authorised representatives on 9 June, 2016. It can be viewed at the following link: http://www.youtube.com/watch?v=b6nPWdFwY5M

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Synchron Director Don Trapnell said, “Since the untimely passing of Synchron Director, Paul Riegelhuth, Victoria has been managed in-house by fellow Director, John Prossor and myself, however as we enter a growth phase for Victoria it is now time to pass the baton to a dedicated State Manager.”

Mr Milosevski is a Synchron NextGen graduate and, having attended two NextGen conferences, was identified for the position after senior Synchron executives noted his interactions with fellow delegates. “We are delighted to appoint someone of Jason’s caliber,” Mr Trapnell said. “With more than 12 years’ experience in the life insurance industry, we believe he has the right skills, experience and relationships to help drive Synchron’s business growth in Victoria.”

Mr Milosevski was most recently a popular and respected Victorian Business Development Manager for Zurich and has previously held roles with AMP and AXA. He will be mentored by Synchron Independent Chair, Michael Harrison.

Mr Trapnell said Synchron wants to replicate its success in Western Australia, where the number of advisers under the Synchron umbrella increased from 14 in 2012, to 56 in 2015, following the appointment of West Australian State Manager, Bernie Fernandes. “Our initial goal is to increase our presence in Victoria from 125 authorised representatives to 175 in the next two years.”

Synchron is one of the largest non-institutionally owned financial services licensees by adviser numbers in the country and one of the fastest growing.

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