ASIC's FOFA guidance gives planners a reason to smile
When the Australian Securities and Investments Commission (ASIC) last month released its guidance around the Future of Financial Advice (FOFA) fee disclosure requirements, there was an almost audible sigh of relief from the industry, based on the relative flexibility of its approach.
Most concern centered on whether the fee disclosure requirements specifically applied to just new clients, or whether they encompassed existing clients and the need for clarity from the regulator on this issue.
However, what should not be forgotten is the history of the fee disclosure requirements and the manner in which they were included in the FOFA legislation.
In particular, financial planners should not forget that the fee disclosure requirements are a construct of industry fund lobbyists and that their inclusion effectively blind-sided the planning industry.
Financial planners have rightly argued that the fee disclosure requirements are mostly redundant because fees and other arrangements are properly disclosed at the beginning of any relationship between clients and planners and are, thereafter, referenced in the annual documentation received by clients.
It might also be noted that the fee disclosure requirement largely duplicates the processes covered by “opt-in” and the requirements which must therefore be part and parcel of any of the codes of conduct ultimately sanctioned by ASIC.
It is worth noting at the beginning of a Federal election year that the fee disclosure requirements are one of the key elements of FOFA that the Shadow Assistant Treasurer, Senator Mathias Cormann, has undertaken to remove in the event that the Coalition gains Government.
As a reminder, here is Cormann’s list of FOFA changes post-election:
- Removal of opt-in;
- Simplification and streamlining of additional annual fee disclosure requirements;
- Improving the best interests duty;
- Providing certainty around provision and availability of scalable advice; and
- Refining the ban on commission on risk insurance inside super.
It is folly to make too many assumptions about the outcome of a Federal Election not due until September 14, but the tenor of last month’s ASIC guidance and the consequent implementation time-table suggest that planners may well be wasting energy if they become too exercised about the time and costs involved in meeting the requirements.
That said, it is to be hoped that both the Government and the regulator will clearly acknowledge that the new regime applies only to new clients.
Little real purpose will be served by seeking to apply the new fee disclosure regime to pre-existing clients except, of course, to suggest an agenda to inconvenience a large section of the industry.
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