Levy backs fee disclosure reform

The independent chair of the Quality of Advice (QOA) Review has called for the removal of “onerous” ongoing fee disclosure obligations.

Under recommendation 8 of the final report of the report, Michelle Levy called for the simplification of ongoing fee disclosure provisions.

Providers of financial advice were currently required to give a fee disclosure statement to the client, to obtain the client's agreement to renew an ongoing fee arrangement, and obtain the client's consent to deduct advice fees.

Levy stressed compliance with these consumer protections should not be an “onerous obligation” for financial advisers.

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As such, Ms Levy — a partner at global law firm Allens — recommended existing provisions be replaced with a “single consent form”.

The catch-all consent form would explain the services that to be provided and the fee the adviser proposed to charge over the proceeding 12 month period.

The single consent form, which “should be prescribed”, would also authorise the deduction of advice fees from the client's financial product and “should be able to be relied on by the product issuer”.

“Multiple forms would only be required where fees are to be deducted from financial products issued by more than one product issuer,” Levy noted.

Additionally, under the same recommendation, Levy called for “a single prescribed form” which would be applicable to all product issuers, including superannuation trustees.

However, she stressed product issuers would not be legally required to accept the form.

“This is because it is possible and should continue to be possible that different product issuers might apply different rules to the payment of ongoing fees,” she said.

“Some might apply caps on ongoing fees or permit ongoing fees to be provided in relation to some advice only.

“While it is desirable to have a single consent form, it is not desirable to dictate whether and in what circumstances a product issuer must allow a client to pay advice fees from their financial product.”

Levy has also proposed “greater flexibility” be given to advisers regarding when they obtain a consent form from a client, provided consent is received on an annual basis.

This new obligation, which would apply only to financial advisers, would aim to ensure advisers were “motivated solely by the interests of their clients when providing advice”.

The Albanese Government was yet to issue a formal response to Ms Levy’s final report, but has indicated it would launch further consultation before handing down a decision.