Leeway urged on opt-in for locked down clients and advisers

10 July 2020

The further six-week lockdown in Melbourne and key areas of Victoria has seen renewed calls for the Government and regulators to allow financial advisers some relief around the opt-in rules. 

The Association of Financial Advisers (AFA) acknowledged that it had made such a request earlier this year when the first round of lockdowns occurred and that it would be renewing its calls with respect to advisers caught up the Melbourne lockdown. 

AFA director of policy and professionalism, Phil Anderson said he believed an acknowledgement of the problem and the injection of some flexibility into the arrangements was justified, particularly for advisers dealing with older clients. 

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“There are obviously older clients who like to meet face to face and who like to send things in the mail,” he said. “Given the current circumstances it is possible that their opt-in documentation will not be received on time and advisers will find their authorisations lapsing through no fault of their own or that of their client.” 

The opt-in requirement means that financial advisers who have an ongoing fee arrangement with a retail client must obtain their client's agreement at least every two years to continue the ongoing fee arrangement.  

Anderson said that the AFA’s original request to Government had not met with a positive response but it was possible there had been a belief that the situation was beginning to recovery. 

He said that had certainly changed with respect to financial advisers working in Victoria and that advisers needed to allowed at least some lee-way in the current circumstances. 




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COVID has highlighted a broader issue with Opt-In. For many people it is simply not feasible or convenient to sign documents within the tight timeframes required. Social distancing restrictions are an added reason for this at the moment, but in normal times there are other factors such as work, travel, and family commitments which busy clients are constantly juggling.

Annual Opt-In is designed around the outdated concept of clients who have lots of time on their hands, and are constantly popping into the adviser's office for a cups of tea, a chat, and to sign the swathes of forms our regulators insist on. That model only ever worked for a minority of clients, and in COVID times that minority has contracted even further.

Doubling the frequency of mandatory Opt-In will make this issue even more difficult to manage, and will forcibly terminate many clients' relationship with their adviser against their will.

The AFA should push to get rid of the Opt-In altogether. If it is OK for 1000 Industry fund financial advisers to be paid ongoing salaries & bonuses from intrafund fee theft (paid to those advisers without obtaining any form of informed consent & no ability for those fund members to Opt Out), then retail investors who have provided informed consent via a statement of advice & have "opted in" to ongoing retail adviser fees should not be required to provide ongoing Opt In agreements. The only time that ongoing fees should be reviewed is in a future review Statement of Advice (whenever that may be scheduled).

Surely now with the removal of conflicted remuneration, commissions on financial products we can refine the legislation. As follows;
Dear Client.
This is the annual reminder that over the last 12 months you've paid me $5,000 for Financial Advice Fees. If you don't feel like you're receiving value you can turn it off. Phone this number.
Kind regards

Surely a simple annual reminder is all that is needed and we don't need all the other complicated guff about services provided and opt in. Ineffective & conflicted Advocacy from Industry Associations like the FPA, have lead us to this point of excluding Australians from advice.

Its gone crazy now, look backs on fees from 3 years ago, if no roa,soa provided annually every single year then refund the lot, plus interest. This is probably the most unfair thing I have seen so far from asic and ive seen a lot. Most csas included a review back then, but not a roa,soa annually, now asic says it had needed to be provided even if the client didnt need it. Also we didn't even have a no change roa template back then. Now we are being forced to refund fees for services we never agreed on with the client! Its one stuffed up situation Yogi, forget fasea, this is the straw that will break a lot of planners.

It certainly is crazy, but is it being driven by ASIC?

A lot of the craziness is being driven by licensees that are going way beyond the legal requirements. Some are doing it to deflect blame onto advisers while trying to restore their tarnished brands. Some are doing it to terminate advisers without due process or compensation. Some have incompetent compliance people who don't really understand the rules themselves. In many cases it's a mixture of all these things.

When a licensee says "you have to do this because ASIC says so" there is a strong chance they are lying. One of the unexpected benefits of the FASEA exam is many advisers are learning regulations from the original source, rather than from their licensee. It's amazing how big the differences are.

Yet no such refund would be required with a wholesale client, where the exact service support arrangements could be in place. It's insanity.

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