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.
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.
Recommended for you
ASIC’s enforcement action is having an active start to the new financial year, banning a former Queensland financial adviser for 10 years in relation to fees for no service conduct.
ASIC has confirmed the industry funding levy for the 2024–25 financial year, and how much licensees can expect to pay.
Australian licensees are expected to make greater use of custom model portfolios for their clients, according to State Street Investment Management, following in the footsteps of US peers.
Adviser Ratings has argued that it’s time for more advisers to utilise digital engagement tools available to them as a disconnect grows between consumers seeking advice from finfluencers and from professionals.
