FSC and FPA to create fee disclosure code

The Financial Services Council (FSC) and the Financial Planning Association of Australia (FPA) will work to codify requirements to support an industry standard for advice fee consent and independence disclosure.

In an announcement, the FSC said there was “considerable angst” that had been caused after new disclosure requirements on fees were issued by the corporate regulator that took effect from 1 July. The requirements were in relation to advice fee consent and independence disclosure relating to ongoing and non-ongoing fee arrangements.

“Different approaches to implementing the law, however, creates the risk of new uncertainty for the advice sector,” it said.

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“For this reason the FSC and the Financial Planning Association have been working together to generate a set of requirements that should support an industry standard form. Our aim is to ensure that consensus on this area of regulation can reduce the cost of providing financial advice by lowering compliance complexity.

“The FSC knows that the fee disclosure statement and opt in requirements when combined with new advice fee consent documents and independence disclosure will result in a large and complex table of numbers that will be difficult for consumers to comprehend. Availability of information is not a good indicator of whether that information is understood.”

The FSC said the solution to the complexity would not come from regulators.

“Subject to legal review and implementation by FSC’s members we will look to codify this as standard industry guidance,” it said.

“The effectiveness of the guidance will depend on how broadly it is accepted by the industry, including by financial advisers themselves.

“The FSC is strongly of the view, however, that a consistent approach is a better outcome than the prospect of a variety of different forms requiring different levels of scrutiny from the regulator which will drive up cost.”




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Too late for many of my clients who are getting packages of between 2-5 forms, each of which is 4-7 pages long. Hopefully they have a sense of humour

We are dong the same. But we also attach a cover letter telling our clients this is a requirement demanded by the Coalition Government, and this is exactly the sort of nonsense red-tape BS that has forced us to increase our fees and reduce our level of service. What a great platform to highlight the ineptitude of Hume, Frydenberg, Morrison and co.

Better late than never.

Ah Hedware please advise us all from your lofty perch how many FDS, Fee Consent forms are required for General Advise Sales & Intra Fund Advice Sales for the $$$$ millions & millions in HIDDEN COMMISSIONS that Industry Super charge All members and most members do t get any sales / advice.
Yep Hedware that would be ZERO FDS & FEE CONSENT forms as All these HIDDEN COMMISSIONS, mostly for No Service don’t require such member sign off.
Member $$$$$$ Theft on a grand scale.

Why does it matter to you whether or not industry super members are accessing all, some or none of the services on offer? It is not going to make a dent on the services provided directly by qualified financial advisors and therefore the fees they receive.

Here's some lofty advice. You should be happy that industry super members are not using funds' intra advice as this shows the intra fund services are not valued or members of industry funds are using the services of external financial advisors. As it was put to me recently, people who use intra fund advice help a financial advisor know that these people are not going to be long-term nor profitable clients.

If I sound a bit commercial then that is because financial planning is a business and not a charity. Planners need a return on their investment (and relief from regulatory costs). Planners who want to run their business along ideological lines are not being professional and should get out and get into politics.

BTW nice use of caps and repeated symbols - nicely graphic.

Why it matters is create a level playing field. The fact that the Union funds have conned some people in Treasury to insert this (fees for no service) racket into the legislation, proves how corrupt it really is. The bad news is that retail advisers have finally worked it out & this racket will implode eventually. Do you want a hit & miss "health direct" or do you need your local GP? A no brainer, actually.

Why does there need to be a level playing field? You're not providing the same kind of service. A proper financial adviser can help clients with far more issues than which investment option someone should have in their super fund. Just because you can also help someone with that doesn't mean you should be treated the same way. Should we also ban superfunds from giving any information about their product? Should we ban the call centres from telling members how to make a contribution?

Like it or not, the government decided that there is a certain level of advice that should be made available to members at the lowest cost possible and that means by allowing it to be paid for from the administration reserves. I hope you're providing better advice than what intrafund advisers can give and if so they aren't your competition. Also, you seem to always seem to imply that it is only union funds with intrafund advice, all superfunds can use intrafund advice.

And to the people that relate it to commissions, a commission was paid to advisers based on the % of FUM just for getting a client into the product, there was no requirement to provide any service to that person (although many did because they were their clients). The intrafund advises are paid a salary by the fund (and yes sometimes bonuses)... it's not based on % of FUM and there is no incentive for the fund to be paying advisers to do nothing. They are all trying to compete to be the cheapest fund or the best product.

so we return to the issue of "general" information versus "personal" advice. The super fund can charge ongoing intrafund advice fees (from the super fund without opt ins etc) for providing general information & admin support, but retail advisers providing general information & admin support cannot (without opt ins). A massive unlevel playing field. Its not about the personal advice, its about the general admin support costs that Industry Funds are making a killing on, whereas retail advisers are being sent broke. Incredibly unjust.

And to the people that relate it to commissions, a commission was paid to advisers based on the % of FUM just for getting a client into the product, there was no requirement to provide any service to that person (although many did because they were their clients). The intrafund advises are paid a salary by the fund (and yes sometimes bonuses)... it's not based on % of FUM and there is no incentive for the fund to be paying advisers to do nothing. They are all trying to compete to be the cheapest fund or the best product.

Have you ever consider that you charge a flat fee rather than a % is because of the following.... $100 pa on some poor struggling member who is trying to get over $10,000 in their super is being charged 1% pa fees for Intra Fund Advice fees simply to pay the salaries of those who can only manage to provide a service to a few. If the service/advice was worth anything at all, you would be able to charge for it. Relying on exemptions to charge members for work you claim is valuable yet are unable or unwilling to get informed consent from members. On a high horse you are not.

But we're not talking about $100 per person, we are talking a few dollars per person per year. And if the fund was to stop providing intrafund advice, i doubt they would lower their admin fee to account for that, they would probably just find somewhere else to spend it to enhance their member services.

I have no issue with a general information admin cost imposed by the fund trustee. I have an issue with using those funds to provide PERSONAL advice, without opt in or informed consent. And if you do the maths, given the number of salaried intra-fund advisers (about 3000 currently), these funds are charging over $100 million pa in ongoing fees to pay these advisers to provide PERSONAL advice, without opt ins or no informed consent. Many of these fund members will pay fees for over 40 years, and never receive advice. One of the most horrendous "fees for no service" scams ever devised. Its a playing field as unlevel as the Himalayas.

Where did you get the figure of 3000 intra fund advisers from?

And there is no need to capitalise PERSONAL... Intra fund advice can be personal advice, it just has to be limited to certain subjects... so i'm not sure what you are trying to highlight here?

The salaried adviser numbers (broken down by funds) were published in the Financial Standard in 2019. They haven't dropped since then. The point about personal advice is that intra-fund advisers receive remuneration providing personal advice without being lumbered with the red tape now imposed on retail advisers wishing to provide personal advice. It's a complete scam, and you know it.

I definitely don't think it is a scam, and I'm not sure why you are so obsessed with it.

Obviously you are collecting an intrafund salary & bonuses (without seeking informed consent nor opt ins). Little wonder you cannot see a problem with it. 10,000 retail advisers might think otherwise.

I'm not actually... I am a member of a fund that offers intrafund advice so according to you I should be annoyed but I'm not. I also don't think 10,000 retail advisers have the same train of thought as you, most just get on with their lives after realising intrafund advice doesn't affect them.

When you have to operate a retail advice business, I will take notice of your comments. Until then, I doubt you would be concerned that you can take undue advantage of the highly subsidised advice your super fund offers, that all your fellow fund members are haplessly paying for (on your behalf). Little wonder you cannot see any problem & that you would have no desire to see this fee racket changed. You could even be a Fed Govt employee, per chance.

I am the person subsidising the other members...I am paying for intrafund advice that I will never use because I understand the industry and financial planning matters better than any intrafund adviser would. I am literally the person you think should be offended that my fund offers a service that I will never use. But guess what, I'm not. I know that it is a service that many other members would want and I know that it is funded by the administration fees I pay. It's just like every other thing the fund does that I don't use, I'm fully aware of how much fees I pay and still choose to be in that fund.

Just like commissions - but they are banned. Never mind, you will be getting the option to continue paying for Intra Fund Advice from all Super Fund Providers ASAP. You want it and you like it, you will get.

This is getting messy.

How about this, continue with intra-fund advice and just deduct it as a 'fee for service' from the members account balance under the sole purpose test?

If all the frame works are built around 'informed client consent' then this would solve a lot of the equity problems. People who aren't using the service aren't paying for it and the ones that do, do pay for it. You've got your informed consent as well.

Whilst your at it, why not let all AR's be able to provide the same limited advice service to the Australian public and charge the super fund (agnostic to product) under the sole purpose test for the advice service provided. If an AR doesn't want to provide that service, then so be it.

Questions I have from this are; Why does this type advice have to be pinned to a product provider? To what purpose would this continue to serve if financial advice is a proper profession?

Given there are no trailing commissions from superannuation product payable to advisers, what risk is introduced to the public if the above was implemented? If one of the risks is that the public are charged too much for this service, then wouldn't this be covered under the last part of COE Standard 7?

It is messy but that's life. In a fee for service business, some clients get better 'bang for their buck' than others. How do you propose to level this playing field?

Re your deduction idea, I am not sure of the service costs of providing intra-fund advice, but possibly in terms of cost-benefit it is probably cheaper to provide an omnibus service than having a system in place to administer deductions.

Not having any interest in industry funds, I am not sure how well the availability of intra-fund advice services is promoted to members of industry super to increase usage and therefore possibly to justify deductions. But I prefer people to use independent professional advisors.

Your ultimate question could cut both ways.

Anon you nailed it with "A proper financial adviser can help clients with far more issues than which investment option someone should have in their super fund." You said it better than I did.

Yes Hedware, good point. In contrast, Intra Fund Advice will limit advice to the product only, ensuring that making additional contributions to the fund are assisted, switches from one investment option to the next, doing death nominations even if incorrect Intra Fund advice will help, basically anything to prevent a member leaving the product. Under Intra Fund advice, you will never be told that your fund is a poor performer, your investment options are limited, underlying investments of the fund are unlisted, or that you could do better elsewhere. No Intra Fund Advice will ever tell a member to move to another fund, pay down your credit card before making a contribution. Intra Fund will never come back and review your TTR or check that your if you Mother is your nominated death benefit that your defacto Judge will actually get the money. Your Intra Fund representative will be very hard working - they are paid by the fund and in some cases get bonuses from the fund so they are very keen to keep the interests of the fund first, front and center and over yours as member on the end of the phone paying Intra Fund fees that you can't opt out of. You as the member are stuck.

These are just a few thing Hedware - but you still persist.

I still reckon your from Treasury.

Good to see you supporting my position to use a professional financial advisor and getting over your obsession with intrafund advice.

Obsession is a word you use - injustice is more accurate. Clearly not important to capitalist like yourself?

"why does there need to be a level playing field" you've showed your ignorance in that very comment. Which I won't go into because I'm dumbfounded. I'd just like raise another point in that Intra Fund advice is killing genuine face to to face advice...The cost of delivering quality face to face advice has sky rocketed, and we're dealing with Super funds staffed with shonky "Car Salesmen" in boiler rooms, lying, ill informed Client retention teams that say salary sacrifice 50 times a day, and that Comrade, prevents the vast majority of Australians from seeking REAL Advice. When was the last time a Super Fund "seller" turned away a client because it was in the clients best interest to get better complete advice rather than be sold a salary sacrifice strategy to solve their tax problems, investment problems, debt problems, cashflow etc etc etc.

You missed the point as Anon is saying what you said. We are all saying use professional independent qualified financial advisors. No one is saying use intrafund advice only or if at all. But no one should hire a financial advisor who runs on ideology only.

Alright, let's make it an even playing field. You can get paid from the administration reserves of the fund but you are now beholden to the fund, they say how much you get paid. They send you the clients, you can't get clients of your own. You can't have an ongoing relationship with this client. You can only give them advice on very limited topics to do with their interest in the fund. If you can't help them, you have to refer them to someone else. But your employer says you can only refer them to who they say you can refer them to because they have a fiduciary duty ensure they are acting in their member's best interests. Congrats, you can now be paid from the admin reserves but you have a whole lot more red tape to deal with. Still interested? Sure they don't have to give an FDS or get informed consent but they have a whole lot of other red tape that completely restricts what they can do.

I agree that the cost of advice here is the issue. It's not that clients aren't coming to "REAL" advisers because they think they can get it for free from intrafund advisers, it's because they simply can't afford to go to a proper adviser so they make do with the cheap option. I have personally seen plenty of clients come to advisers because they weren't satisfied with the intrafund advice, that's why i don't think they are in competition with each other.

Direct your rage at the compliance burden for advisers. Obsessing over intrafund advice is not going to fix the problem.

“Why does it matter to you whether or not industry super members are accessing all, some or none of the services on offer?”
Wow ok Hedware, so now HIDDEN COMMISSIONS FOR NO SERVICE ARE FINE ARE THEY ??
Hypocrisy of the highest order.
RC rightly slammed the banks & AMP for over a decade of Fees for No Service.
ASIC knew of these Fees for No Service and happily did nothing about it for a decade.
They finally get busted and Industry Super somehow believe their HIDDEN COMMISSIONS on a huge scale and Mostly For No Service is acceptable practise.
Remember ISA bashing Advisers for 20 years over Advisers Commissions???
Yet somehow now ISA thinks HIDDEN COMMISSIONS are fine.
Definitely the way to a professional Advise world Hedware, led by Industry Supers massive:
- HIDDEN COMMISSIONS FOR NO SERVICE,
- NO FDS / COMMISSION DISCLOSURE STATEMENT
- NO MEMBER CONSENT of COMMISSION.
- NO OPTION FOR MEMBERS TO EVEN OPT OUT
- All ADVICE / Sales provided by call centre jockeys with no Best Interest Duty and no FARSEA rules, No SoA’s.
What an absolute RORT !!!!
But hey Hedware if you can stick that ISA snout deep into the trough and drink members $$$$$$$$$$$$$$$$$$$$$$$ whilst doing Nothing, well why not hey :-)

"Why does it matter ....... whether or not industry super members are accessing all, some or none of the services on offer?"
You said it mate.
Only someone getting $$$$$$$$ from this scam could agree with you.

Hedware - we spoke about this in another post where issues of equity were at play between advice provision types. Often this is described as an unlevel playing field.

In your last response (some of which I agreed with), you dismissed there being any inequity when it comes to advice fees and described this is moot.

I strongly disagree.

Let's premise the argument on this - Assuming the professional registration of all advisers is the same via the ASIC FAR then.......

.....How is it that one group of advisers may have their advice fees charged from a general admin fee via product without a clients informed consent whilst another group of advisers are explicitly forbidden from doing this?

.....Why does one group of advisers have to obtain informed consent from their client, disclose and clearly delineate the service being provided, inform how much the advice will cost and from what source the fee will be paid (more paperwork if it is from super or investments), provide mechanism for a client to opt-out at any time and repeat this gathering of informed consent on an annual basis in order for the client to remain a client and the fee to be charged...... all of this whilst accepting the risk of being fully liable to remediate and potentially face disciplinary action if the above isn't demonstrated.....

.....Whilst the other group of advisers do not?

Again, assuming that AR's are considered equally.....

..... Why is it regarding certain superannuation products that one group of advisers providing advice to the Australian public may have ability to deduct an advice fee from a members super fund directly under the sole purpose test, whist an adviser with the same qualifications providing the same advice to the same Australian public cannot? To what purpose does this serve?

If superannuation trustees have a duty to their members first and foremost and one of these duties is to mitigate risk of funds being released from a members account without a service being provided, then why is there such a considerable disparity between how super fund trustees handle this obligation?

Given the above, why is it that some outcomes for clients resulting from advice arguably appear largely determined by whom the employer of the AR is rather than the qualifications of the AR holder?

So let me ask Hedware, if AR's were considered all the same as professionals as I premise throughout this post, do you think that the system that currently exists is equitable?

Thanks Max for some thought provoking ideas. I consider Anon above has given a good take on your points.

The nashing of teeth over whether an industry super fund client is using the intra fund advice or not is a waste of time. There's plenty of services that we dont fully exploit for what we pay - taxes is one; insurance is another - there are those who over exploit the pool to which many contribute - smokers in hospital care is an example. As I said in my previous comment, this is not a problem nor issue for financial planners and can be regarded as a blessing to some extent. Anon says it well.

Similarly clients, whether in a retail fund or an industry fund, get advice - call it intra fund advice - that is paid from administrative or management fees. It's low level stuff. The amount spent on this stuff is minuscule in the whole scheme of funds under management. In fact clients expect to be generally advised about common matters associated with their investment/fund. It's part of customer service and relationship. We all do it.

"Why does one group of advisers have to obtain informed consent from their client..." is because they are professional financial advisors - that's being part of a professional body. Those providing low level advice, statements, updates are on the other side of the fence and should stay there. The rules and regulations give financial advisors standing and currency in the community to be known for their expertise, training and delivery of high level advice. In fact these rules and regulations give financial advisors a bit of a monopoly and keeps the riffraff out - doctors with their members only ticket have the best union.

With rules and regulations, the pendulum has swung a bit far but that was the outside response to a group that couldn't manage itself - think about it as a reaction to a market failure. When the banks got into wealth management, you knew that it would become a stinking mess. The current format of SOAs is more useless than the format they replace for setting or reviewing investment strategy.

I endorse your comment re trustees and I believe they whether retail or industry boards got of lightly at the Royal Commission. There's still work to be done with trustees.

Re your last two paragraphs - it depends on the qualifications and certification of the professional giving the advice and the content of the advice being given. There's a difference between giving standard service advice and giving professional financial advice. Whether that person is getting a salary or fee is immaterial for the moment.

This fixation about intrafund advice, inequities, industry vs retail ideaology, etc is getting in the way of the bigger picture of what is happening in the global economies, technology disruptions, pandemics, climate change, QE, inflation, interest rates - the list of worries goes on and on. It is of all this that financial advisors need to be making their assessments and calls for their clients. That is their job. Let's get on with it.

When Labor is prepared to reverse their position on annual renewals & ongoing Opt Ins for retail advisers, the intra-fund racket will then be forgotten about. However until then, get ready for a lot of pain against your hundred million dollar ongoing intra-fund fee racket (where calculative retirees are receiving highly subsidised personal advice at the expense of millions of other fund members, without their informed consent).

The Union Super Funds have achieved exactly what they wanted, by entrenching their monopoly status through the Hayne2 legislation burying retail advisers with red tape, while they continue to charge millions of their fund members ongoing intrafund advice fees (without informed consent or opt ins). Well watch this space.

Very true Steve. The Liberals have entrenched conflicted advice through their intra-fund rules which benefit the Big Super funds. Pretty sick really considering that the Liberals lie about being pro-small business.

You are right about not being caring about small business despite the talk. But on current trends, the super funds are predicted get bigger via mergers and choice as size, fees and deal making matters in the super and pension business. I read somewhere here that the trend is towards about 10 funds in the future. It will be interesting watching the power plays on the retail side

Vanguard is going to give the Union funds a run for their money. Can't wait.

You can already beat all the industry funds by investing in Vanguard's diversified options through a low cost wholesale platform.....just so long as you're using the comparable Vanguard option i.e. Vanguard High Growth versus Industry Fund default Balanced option (which actually has 90% growht assets).

Yes, the Colonial First choice super (0.2%) with the Colonial Index High Growth Fund (0.13%) looks like a good contender against the Vanguard offering (for small accounts)

Vanguard has good reputation in Australia, size, good customer service, low fees, and a good product range (albeit not as good as its offerings in the US).

Yes it will be competitive with some industry funds but more likely it will compete with Australian retail funds, particularly those with high fees and average performance. There's a couple of other retail funds in the top 10 that offer good performance and sensible fees. Good to have competition in the marketplace.

The red-tape loving Liberals will need to think of something else to burden small business with.

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