Advice bodies brace for opt-in outline

Financial planning groups are this week expecting the Treasurer, Josh Frydenberg to release further information on the Royal Commission’s recommendation 2.1 dealing with client opt-in arrangements, amid concerns that many advisers are already moving to drop low value or marginal clients.

Recommendation 2.1 has already been broadly accepted by the Government and its implementation would require advisers to review ongoing fee arrangements annually with their clients with more specific detail around what is being provided and the “express written authority” of the client.

Association of Financial Advisers (AFA) general manager, policy and professionalism, Phil Anderson said there would be keen interest in the detail of the position being pursued by the Government and said this was one of the reasons the AFA last year produced a discussion paper urging greater flexibility.

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The AFA discussion paper urged the retention of biennial rather than annual opt-in arrangements for low fee-paying clients and expressed strong opposition to product providers obtaining opt-in authorisations directly from clients.

The discussion paper urged flexibility on the basis that some clients simply did not have the financial capacity to afford a full annual review and renewal service.

Speaking to Money Management this week, Anderson acknowledged reports that financial advisers were adjusting their businesses to accommodate the expected changes, including effectively dropping marginal clients or offering them access to specific event fee-for-service advice.

The AFA discussion paper noted that in circumstances where financial advisers were required to obtain approval from a client every year, product providers should not be required to obtain approval any more than every third year or have any right to seek authorisation directly from clients.




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"The discussion paper urged flexibility on the basis that some clients simply did not have the financial capacity to afford a full annual review and renewal service" - I do wonder whether perhaps the first question to be asked is whether all of these clients actually need a full annual review??

Yes, the Fed Govt should look at this, but only if the Union Super funds are also required to seek an annual admin fee renewal from their members for Intra-Fund Advice, for advice most of their members never receive, and currently cannot opt out of. Until then, there should be no change whatsoever.

They want to know if we are dropping marginal clients? We measured a minimum fee and then moved on 25% of our client base in a single month. With annual opt-in we will increase the minimum fee accordingly for the administration costs and then move on everyone who falls below the new hurdle and on it goes. its done and they are no longer advised, most now have an industry fund option for their super and no adviser for the rest.

People are just stupid. Of course fees are going up. Compliance requirements are significantly more than they were 15 years ago before all this "improvement". ASIC fees did not exist, FASEA fees did not exist, TPB fees did not exist, Austrac did not exist, AFSL licensing fees were less, PI costs were less. I followed the advice of "go for software - it will improve your productivity". Compared to 15 years ago it has failed and now I pay $30,000 in software costs, for SOAs, FDS tracking, ATO super reporting and research on funds I will not recommend. Why would anyone expect costs to fall???

Don't want to take the risk of doing one off advice. I'm sticking with people that want an ongoing relationship and are happy to sign something annually and that's means I've been turning away clients for years. One off advice is a legal nightmare. I just know that all those one off advice clients will run back into your office all at once screaming either "It's all your fault you said my super fund would do the job.".

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