AMP Limited is worried that it may have another fees for no service case on its hands.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry revealed that AMP has discovered incidents as recently as mid-October relating to the charging of fees where no financial advice services were provided.
The revelation came as AMP acting chief executive, Mike Wilkins was giving testimony to the Royal Commission in which he confirmed the company was currently conducting a detail historical review of the fees of the planned service fees within its superannuation funds.
He agreed that an initial and high level assessment had indicated that there were policy and control gaps in the management and monitoring of fees charged to workplace super members and for fees received by AMP advisers.
Wilkins also confirmed that AMP had identified eight incidents as at 17 October 2018 with respect to charging of planned service fees and the provision of services.
However, while the AMP CEO could confirm that the incidents were being investigated he could not confirm that they had been breach reported to the Australian Securities and Investments Commission (ASIC).
Asked by counsel assisting the commission whether there was a risk that AMP might have another fees for service case on its hands, Wilkins responded “yes”.
Comments
Is there anything correct at AMP? One big consideration. If AMP ran a report for each of the past 7 years ie on 30 June and they then compared with the report produced previously for that year, will it balance. This includes the commission statements, management fees and client reports or maybe they are out. Not just produce the report from the batch but run the full calculation for the year. Interesting that the auditors have continued to sign off and keep giving at ASIC and APRA a clean bill of health. Is not one of the requirements of the auditors not just check the financials but the controls, processes,and main functions? Maybe it just slipped through or forgotten over the past 10 years.
This sounds awfully familiar with an Enron ignorance
Bear in mind this 'fee for no advice' is a new construct of the current anti-adviser ASIC executives who are pro-ISA. It has never been written as legislation nor regulation, but now incorrectly, articles are stating it is a 'breach'.
This does not represent 'fee for no service' which is incorrectly indicated at all levels, whether in the media or even at the highly fallible Hayne led RC.
ASIC has put its own interpretation to what they deem appropriate charges only since the RC fiasco began. At no point prior to this have they stated that if a client had come into your office 4 or 5 times a year for 'counselling' or assistance with Centrelink forms or even to be calmed down because the markets had tumbled, that this was not adequate service.
It is only since the RC that they and inept for the role Hayne has indicated that if you did not do a ROA for 'no advice maintain position' as part of your paperwork for each of those occurences, even if you did filenote the discussions or assistance meticulously, then you should be refunding 100% of the fees.
Next 3 times I go to my dentist and he gives me a clean bill of health with no fillings required, or my GP for health checks, or even my estate planning lawyer who indicates that my Will is adequate as is, I won't expect to pay any fees whatsoever oh and while I am at it I must call the gym and get that refund for the 364 days I didn't go there!
Well said. You hit the nail on the head nicely. Fee for No Service and Fee for No Advice are clearly different issues. Unfortunately it appears advisers at AMP and some Bank Aligned advisers are providing neither in the quest for FUM.
I went to the mechanic and he said no need to change the Oil. Yet he still charged me a fee.
You cant be serious.
This isnt about clients who recieved reviews and didnt get provided with additional advice... This is about the thousands and thousands of clients who dont hear from their adviser for years and still have a fee being paid.
I dont pay my dentist a retainer. I dont pay my GP a retainer. Why should someone pay me as their adviser a retainer unless I actually do something for them each year?
SD - I agree totally with you, not advocating not assisting clients and definitely not advisers sitting on large trails and not doing anything. I am talking about how ASIC and RC are approaching those issues but rolling them up with the likes of my prior examples and treating them and all of us exactly the same. A recent session I attended with the guest speaker a lawyer who defends planners against ASIC (where they are judge jury and executioner) has cited exactly these types of circumstances that they have witnessed of late. Regardless of what else you have done for a client or how many times they 'needed you' in a year, or if a client can't get into your office except on day 367 because they have been away, then their unwavering approach is 100% refund of the entire year's fees. Tell me that makes sense?
And no, never mentioned a retainer, my other profession examples were in line with the above - you (the client/patient) see a professional and they don't have to do anything at that point in time (e.g. operate/medicate) and you do that a number of times a year then you don't pay them at all? Sheesh, tell me where you live & who you see and I may consider moving.
Fair enough, I am also sick of being put in the same category of the people that do the wrong thing...
However, surely we arent naive enough to think that all advisers are actually offering a service for their fees. We are always going to be compared to the lowest common denominator and there are plenty of them out there at the moment never speaking to clients and having no intention to. We need to get those people to shape up or ship out.
In my opinion keep commissions and ongoing adviser fees but making everything subject to only 12 month agreements. If you service a client and they see value, its not hard to get them to resign it. If they want to pay a 'retainer' as others are saying clients do, they will be fine resigning a form every 12 months. If they arent willing to resign this form or send a quick email confirmation, they dont value your service.
I just think deep down most complain 'the administrative burden is too much' but in reality that's because they have far too many clients they could never properly service.
Why are Industry funds charging every client for Intra Fund advice as a retainer then and yet you don't hear this on the new? why have ASIC not reviewed one bit of advice regarding super or insurance yet because it would open up a world of hurt.
http://www.industrysuperaustralia.com/publications/reports/industry-supe... this is direct from the industry funds confirming that they are are "charging fee for no service"
Thanks for pointing that out. We are compiling information on all the inconsistencies, flaws, issues and outright misinformation by ISA (and their friends at ASIC when publicly discussing ISA or why they won't investigate properly). If anyone else has information they wish to share, these comments sections are a great public forum for word to get around, so please do as above and provide links or details for all to see and use as appropriate.
We need to stop this bias and discrimination against us and level the professional playing field.
Your dentist or doctor doesn't have the ability to monitor your health without a personal examination. And your health outcomes are not significantly impacted by changes in government legislation or health product features.
Financial advice is different. Ongoing monitoring of financial products and the economic/legislative environment is an area where advisers add significant value. Many clients are willing to pay for this on a retainer basis. They don't know when to request a consultation to make changes. They want their adviser to monitor it for them and tell them when changes are needed. They don't want to wait for the financial equivalent of toothache or a nasty rash, if this can easily be prevented by ongoing monitoring and proactive intervention.
I dont think financial advisers have the ability to properly manage your financial situation without consultation either. So often reaching out to clients (if they dont reach out to you) they have a job change coming up, inheritance, child on the way or want to buy a new home. A fee and a 'let me know if you need anything' really isnt good enough anymore.
We can continue to convince ourselves its fine to receive a retainer so we can protect our bottom line, or we can become a profession.
SD I think you are pushing narrative that all advisers in Australia are not contacting their clients to review their position absurd position. Its like me saying how do I know these doctors are qualified they are all fakes with head lines like this.
Indian fake doctor worked in NSW system for 11 years - The Australian
"Dr Gloria" was dispensing life-and-death decisions without a medical doctor's certificate.
You maybe have experienced a lazy planner in your time maybe you are one but it does not excuse you to lump every adviser doing great work for their clients as people not providing service. Good financial planners see their clients every year and like every industry their are good and bad eggs its just a fact in life you cannot change.
SD guess you know what clients to call when the government changes super policies which affect them if you see your clients when you are doing adhoc advice. Good luck move to another occupation, Financial Planning is not an In-N-Out Burger maybe join an industry fund they are good at that giving "general sorry I mean personal advice".
People are not stupid, people don't believe everything they see and hear, they know people that work in a bank have KPI every job has KPIs and the main driver is $$$ everyone that works understands this which is why you still clients sticking with their financial planners through the good and bad times. Financial planning still exists because they provide values to millions of clients if it was so bad financial planners would be out of business end of story.
You watch the Banking CEO's saying that don't measure their employees by way of $$ targets is BS everyone knows it. they will just call it something else which will have the same targets attached to it. God even the Government ASIC employees get volume bonuses lol and they are getting paid from the tax payer lol
I never said all advisers do not contact clients, I said that there are enough that dont that it is an issue and the rules were always going to be changed based on this. We didnt self-regulate.
We meet with clients at least every 12 months, providing further advice at least every 12 months, but am in contact with them at least every quarter, if not more often. You are calling that lazy over tacking on a 'retainer' and saying the client can call you? Reality is, if you service your clients and add value, they will continue to opt to pay a fee. Anyone against this is scared their clients wont continue to pay if they actually need to be prompted.
Who cares what happens in other industries or what Bank CEOs do. I do not set the bar as low as the conduct of bank CEO's, thats a cop out. Take a fee, provide a service. A service is not just 'being contactable'.
SD - tell me how an Industry Fund receives money $$$$$$$ to pay staff waiting around for "Interfund Advice" oops rllover advice. PLEASE EXPLAIN as I do not understand how their salary gets paid "for no profit".
They shouldn't receive money for that, never said they should. No part of the industry should.
Need to get over the 'but they do it' mentality and just be better.
SD - please know your fact before you speak please.
SD if you really are an adviser, then your clients must be local self employeds or retirees. If you had busy professionals as clients you would realise that it is extremely difficult to get them to re sign an ongoing service agreement every 12 months on the dot. It is next to impossible to get them in for a meeting every quarter. They have better things to do. They pay their adviser to monitor and manage their situation so that they don't have to. They don't want to waste time on unnecessary meetings or bureaucratic forms. If their adviser highlights something that needs attention then they will act. If their personal circumstances change then they will act.
If your clients are popping in for a cup of tea every quarter they are either paying advice fees for social contact (which many retirees do) or you are encouraging investor short termism.
Incorrect. Many are professionals and they make the time to meet at least once a year. When someone sees value in something, they make the time.
I didnt say there was a meeting every quarter, I said there was a discussion in some form whether over the phone or in person.
You would be surprised what you can do when you actually provide a value-adding service instead of assuming they wouldnt have the time to use your offering...
Define "value-adding" please. Just so we are clear on what we are debating.
SD, you are not on the same page as ASIC and is suspect, would fall into their bucket of "fees for no service" with "whether over the phone or in person" - you might well be giving a very good service that is valued by the client but unless you provide advice that is of more value than your fees, you will likely not be "acting in the best interests of the client". It's a minefield I believe Advisers can never win and in the future, will be fertile ground for the new (looking to take to court) ASIC. Remember, they will be under pressure to deliver "heads on sticks" otherwise, how can they get their bonuses. We are frogs in the pot - the water is getting hot but their is more heat to come perhaps.
Additionally, many clients are busy and hard to get every twelve months (365 days and no more). You may be in contact and the client knows what is happening but sometimes strategies mean you are thirteen months away from your next step - outside of twelve months. My tip, never do a bring forward strategy - one year at a time from now on perhaps. What a world.
Nope, clients get advice every year and none of them are hard to get in contact with as they are all engaged knowing exactly what they get for their money. If a client isn't engaged, they shouldn't be a client and can come back and pay a fee only when they will be engaged. Its a massive risk to be charging fees to people you dont actually provide ongoing service/advice to.
100% agree with your interpretation, the winds of change are a dry scorching heat from the bowels of hell for anyone ignorant enough to think the old methods are fine and ASIC knock on your door.
Perversely ironic not to mention hypocritical that ASIC staff are paid and rewarded for 'volume based' performance i.e. the more heads and scalps they collect, the higher their bonuses.
I recently read an account of how the public 'witch hunters' in the thirteenth century pay structure was changed from a retainer out of the kings purse to a fee per village of 9 pence per witch they found. No surprise the number of discovered 'evil hags' increased a hundredfold, and artifacts have shown that pins with retractable heads were part of their tools (if you didn't bleed when poked you were obviously a witch as proof to the village).
The tricky word play and 'interpretations' are those false pins in ASICs toolkit. If they need your head to make a quota or even if they personally don't like you, it does matter what the facts or regulations are or were, all that matters is what angle they wish to take to remove that odd shaped melon off your shoulders.
And don't forget, they are not there to ascertain facts; they are actively being told and coached not to trust you, to treat you entirely as a criminal and their job is to interrogate you, your staff and your records until they find the crimes that they 'know' are there.
Incorrect. I'm not assuming. I know because they tell me. They say "ring me when something important happens in the financial world, I'll ring you when something important happens in my life, and if I ever feel I'm not getting value for money from the arrangement I'll terminate it then. Now let me get back to my job and family please and stop bombarding me with silly forms".
Whatever helps you sleep at night, Deano.
At the end of the day, only one of us will need to change our business model and its not the one of us that meets with and provides clients with advice every year or the fees get turned off.
SD, happy to confirm the firm I joined this year operates on 12 month contracts with all ongoing review clients (incl. retirees, business owners, professionals & not-so-professionals). If they're not happy with our service, the client simply won't sign up next year.
Regarding ASIC action, I personally see it similar to cops chasing crims. If nobody's complaining (because your clients are happy with your service), there's not much for ASIC to investigate/prosecute.
Agree, HAMP. I thought it may have been in the too hard basket until I actually tried it but 12 month agreements are very realistic if you add value.
Does any issue get created with 12 m renewals, where it is deemed now to be a new client, effectively requiring a new SOA to every 12 months?
Do an annual SOA outlining any recommended changes, any insurance alterations (reduction of cover if investments up and debt down), updated projections and also confirmation that existing recommendations remain appropriate.
ok thanks, you would need a particular client level for that I imagine, prepared to pay minimum 3K to be reasonably profitable.
No need for excessive fees. Just depends what the clients want & what service they're signing up to (how you position what you're delivering).
If it's a matter of agreeing to a further 12 months of monitoring performance etc. (e.g. industry fund accumulation accounts), meeting annually to review circumstances/performance/insurances/strategies & being available to contact for ad hoc queries, the actual work involved isn't very time consuming & a significant portion of the value clients are receiving is peace of mind.
It's a completely different game for clients who want customised reports at their quarterly meetings & management of SMSF + Family Trust investment portfolios.
Preparation of SOA can't be done cheaply, initial meeting, SOA, present SOA, adjust. Paperwork for CSA. But also, ASIC hates the term monitoring, you are opening yourself up there - it implies you will alert or contact the client if markets change. This is different to just committing to an annual meeting.
HAMP - I hope you are confident ASIC, once completed the look back, will likely then start on BID and lets hope their definition fits in with your current interpretation.
Yes, the problem with BID is there is no legal definition as I understand it. i.e. it's subjective and therefore ASIC interpretation is critical but then subject to the courts if you can afford to go there!
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