The number of partnerships that will end in an acrimonious dispute will increase in 2013, a Melbourne-based consultant has warned.

Seaview Consulting Director Bob Neill says the increase is due to poor documentation being created when partnerships are conceived hastily.

“When partnerships are signed the parties involved don’t think about what will happen if there is a disagreement,” he told insuranceNEWS.com.au.

“We are finding there has been no attention paid to the details of the partnership when something goes wrong.”

Mr Neill says advisers have been encouraged to merge their practices to achieve scale and operational efficiencies.

The Future of Financial Advice reforms have also been a driver of practice mergers.

“We have witnessed an increase in the number of merged practices deciding to exit an agreement,” he says.

“This trend can be expected to continue within the financial services industry in the foreseeable future.”

Insurance can cover the loss of partner through death or permanent injury, Mr Neill says.

“But even in these cases, the details of how any money is paid is not always clear,” he says.

“The event might be well thought through, but difficulties arise if procedural aspects covering the management of the claim and remittance process don’t exist.”

Mr Neill recommends documentation covering areas outside the insurance process, including how debts are settled, the release of security guarantees and other external factors that may affect the business.

More serious problems arise when there is no cover for events such as a partner wanting to retire or alleged fraud.

“It is well worth spending some time sorting out agreements that cover these changes of circumstance,” Mr Neill said.

“There are a number of events that can trigger this process, but it will be a disaster unless the transition process is managed effectively.”