ASIC tips highlight onerous new FDS regime

Guidance provided by the Australian Securities and Investments Commission (ASIC) around its new fee disclosure regime has highlighted the onus placed on advisers to act promptly when clients for any reason opt out or don’t fill in their paperwork.

In a guidance document titled ‘Tips for complying with fee disclosure and renewal notice obligations’, the regulator made it clear that if a client terminates an ongoing fee arrangement (OFA) by opting out or by not returning a signed renewal document “you need to stop charging them fees under the OFA”.

What is more, it makes clear that it is the adviser’s responsibility to stop such arrangements where fee deductions are occurring via platforms, including checking that they [the platform] had actually turned off the fees.

Related News:

It said that where clients were charged through fee deductions on the part of a product issuer or platform provider, it was wise to implement processes to reduce the risk of non-compliance including providing instructions to third party product providers and platform providers to turn off fees.

ASIC is also recommending that advisers run regular reconciliation and exception reports comparing their incoming fee revenue from the fees they should be receiving from OFA clients.

It said this might help advisers detect instances where clients’ fees had not been turned off and required further investigation.

Recommended for you




Which is simply going to guarantee that similar levels of scrutiny will inevitably be made in relation to "personal advice" that is being paid via Intra-Fund advice provisions, where salaries & bonuses are paid to about 900 (main Union super fund) "advisers", who simply do not have to comply with the FDS regime whatsoever - and where those fund members are paying advice fees often for advice they never receive, and cannot opt-out of. There are a number of senior MPs, who have read (ASIC's) Shipton's comments in the Parliamentary Hansard about this issue, and are not happy about it. Now there is now a totally clear inequity revealed in the Hansard, without question. It's a disgrace.

The whole business with FDS is insane. The number of disclosures and administrative responsibilities is pissing me off. I'm one of those that have been around too long(almost 40 years), have a Masters Degree, completed and passed the Ethics and Professionalism course, and sat that ludicrous FASEA recently. What else do you want me to do? Donate all my blood an handover my first born? My time in this industry which has been destroyed by so many self interested parties, is drawing to an end.


Projected impact of the FOFA reforms on the financial advice industry

In 2012 Rice Warner's estimate that the cost of 'opt-in' will be about $22 million per annum and, on the basis of 2 million Australians receiving financial advice, a cost per client of $11 per year.

Well the cost is closer to ten times this amount per client and maybe closer to $500 per client based on the ASIC report.

How our government and consultants are costing Australians $1000s in mindless red tape and multiple disclosures all overlapping.

it's all very well to complain about the red tape, but many advisers are not looking at the root cause. why is there so many client complaints.

why do people complain so much ?

Hi Anonymous, I can help with that question.

The level of complaints about financial planning fees is actually very low. Any complaint is an issue, and a high level of complaints can point to possible structural issues that should be addressed by industry and regulators.

The issues around 'informed consent' could have been dealt with much more effectively, and in a less costly and onerous way. Complaints aren't the issue - it's trying to change entrenched systems without disrupting markets. That has not been achieved, and appears to never have been part of the considerations for proposing or implementing ideas for change. The end result is massive disruption of markets, and very little change.

Vertical integration remains in place - it's actually been entrenched even further. Adviser professionalism remains unachievable in any situation where all advisers are required to hold their licence through a 'dealer group'. And nobody has stopped to check with the bulk of existing financial planning clients, as to how they would prefer to see things done.

The complaint system within the industry is quite possible the best complaint system of any industry, anywhere. It protects clients to the full extent possible. Even ASIC's own releases confirm that most people who see a financial planner are quite happy with their services.

Yes, the Managed Accounts within dealers now is simply vertical integration, and they are desperately seeking clarity on FASEA Standard 3, which blows apart those business models, if in fact taken literally and as the law states. All to start Jan 1 mind you.

But there isn't a high level of customer complaints is there. In fact the greatest customer complaint according to ASIC is that access to advice is too restricted ad it is too expensive. Yet another activist caught out BSing.

ok fair enough. so if i am to read your comments correctly, there are virtually no complaints about financial planners, or very low numbers. most consumers are satisfied then, as asic themselves have cited in their recent consumer report.

if that were the case, why is the government and regulators so keen on regulating financial planners so stringently then?

no other profession is this heavily regulated. Why ?

my understanding is that most advisers feel the choke hold of regulation is such that they cannot continue in existence, and even if they do, will do so by becoming only marginally profitable.

if there are no issues with financial planning, very low complaints then why the choke hold and carte blanche reformist approach from both the government and the regulators.

Very good question. Quite possibly the best question anyone could ask.

I have my own opinions but they are just opinions. An industry that has a low level of complaints, and a high satisfaction score for people who actually use a financial planner. A structure that builds in conflicts of interest, and yet every single investigation and review has failed to tackle those conflicts - the Royal Commission went as far as to recommend keeping direct conflicts of interest. A supposed objective of building 'professionalism', yet failing to give advisers direct licencing freedom.

So why is it that financial planners are being asked to do the impossible?

so financial planners are being scapegoated for the failures of others, and structures which they did not create nor can dismantle. we all know this, we can't change this and so we accept this and as a result, the scapegoating of financial advisers will continue and destroy many more lives.

that's the grand bargain we are accepting. correct?

Correct. The toll of mental illness alone is such that this should be something of an industry emergency. Yet the myopic approach of regulators, commentators, Royal Commissioners and even many in this industry, is such that no help will be provided - outside of one or two links to depression support services or telephone support lines.

It's a disgrace, but not one that any public figure is interested in, which just goes to show how virulent and successful the campaigns against financial planners have been.

so let me get this. virtually no complaints against financial planners, the data proves it. yet, it's the most highly scrutinized occupation group and the most regulated industry in Australia.

Planners are regularly subject to daily humiliation from the media, government, and their own "professional" associations

so why the over-regulation and persecution of financial planners what objective(s) does this fulfill? what purpose does it serve?

who wins from our demise (which by the way is nearly complete)? the consumers? product manufacturers? who wins?

the industry funds and big retail funds win, they will be giving general advice as personal advice, for fees, and taking the FUM clip as well, and the insurance clip, it will be concentrated to a big few, they get rid of lots smaller operators and clear their way. There will still be planners with larger clients of course.

Anonymous...your joking right? the amount of complaints AFCA RECEIVE about financial planners is about 6%!

In its first month of operations, the ombudsman received 6,522 complaints, a 47% increase compared with to the three predecessor schemes, though AFCA chief ombudsman David Locke said this was in line with expectations.

Most of the complaints AFCA received were about credit (45%), followed by general insurance (21%) and deposit taking (10%). Eight percent of complaints were about superannuation.

The most complained provider type were banks with 2,367 complaints, followed by general insurers (1,159 complaints) and credit providers (1,040 complaints). The complaints were against fewer than 6% of AFCA’s licensee members, meaning that 94% of members were not subject to complaints.

It really is interesting. Most complaints are against providers. A small amount against planners.
ASIC determined that 51% of super fund advice being compliant was a good outcome. All while most of super fund advice is done under general advice and not subject to best interests or an advice document. How is any advice not compliant when you don't have to act in the best interests of the client or provide an advice document? And this is acceptable to ASIC???
The providers (who are only 49% compliant and received most of the AFCA complaints) sit down with legislators and help them come up with the rules. They blame advisers because they can. They are at the table. Not advisers, not AFA not FPA.
They then come up with these offerings to legislators to fix the problems by clamping down on those advisers who are the problem.
This has the added benefit of eliminating their competition (us advisers) so they can then offer PRODUCT advice via non disclosed/non opted in/commission/intra fund advice fees or general advice or as wholesale advice without the need for the pesky best interests duty or costly advice documents.
It's ok though. Smarter people than us are responsible for regulation and legislation and they will know this is the game plan.
They either don't know what is happened and are not meeting standard 9 or they are failing standard 3 and receiving conflicted revenue from product providers or they are failing standard 6.
Funny how planners will soon be the most ethical professionals in the country and will demand others catch up to our level.

@ anonymous,
Were there many client complaints ?
I wonder if this stems from Dealer groups being owned previously by large institutions that largely ignored what is required by all of us and was uncovered during the Royal Commission.
Otherwise, if there were many complaints, wouldn't you expect ASIC to highlight those problems before hand ?

Add new comment