Licensees wanted remediation ‘opt-in’ says ASIC

A number of financial services licensees have argued that clients should be made to “opt in” to the remediation process surrounding fee for no service, according to the Australian Securities and Investments Commission (ASIC).

In new information uncovered during yesterday’s public hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASIC deputy chairman, Peter Kell, said the regulator had faced resistance from licensees on the remediation issue including some firms wanting their clients to “opt-in”.

“So we’ve ended up having, at times, reasonably vigorous debates around the scope of the review and how many licensees should be included,” he said. “We had discussions with some firms who wanted to suggest that a remediation program where consumers had to actively opt in to get remediation was appropriate.”

Related News:

Kell said this ran counter to ASIC’s view which was that, given the passive nature of many of the fees, “opt-in” would not be the right way to go.

The ASIC deputy chairman also pointed to some firms arguing about the length of remediation programs and “whether a mere offer to conduct an annual review to the client – even if that wasn’t taken up or the client couldn’t be contacted – whether that was sufficient to allow a fee to be charged”.

“All of those issues and more, frankly, have been, at times, in dispute,” Kell said.


Recommended for you




There are a large number of useless advisers and/or AFSLs that take money for doing nothing. However, ASIC needs to be mindful that advisers do more for clients than just reviews. Monitoring portfolios and making clients aware of fund manager changes, asset allocation issues and legislative changes BETWEEN reviews is equally important and a valued service delivered by many hard working advisers receiving ongoing fees. In many instances, clients genuinely elect to forgo a review when their circumstances haven't changed, especially in light of info fed to them by the adviser between reviews. So ASIC taking a hard line around whether a review is done or not and being the only justification for receiving fees is out of touch with the reality of mainstream practices.

I couldn't agree more. Kell has never taken the time to understand the services financial planners provide and the value our clients see in our service. We desperately need someone to stand up and counter the nonsense he is delivering to the Royal Commission.

with all do respect, you likely have no idea whether what he is delivering is nonsence or not? Are you a practising adviser? if so, have you in a past life personally reviewed thousands or adviser files, dealt with hundreds (thousands) of advisers from across the country? spread across hundreds of licensees from institutional to so called independent? If not, then you are not really in a position to comment on what the "industry" does. You may well keep your own shop in order, and well done to you, but in all likelihood, your tiny patch of the world in no way represents the bigger picture. Something to think about before jumping to the "industries" defence as an immediate reaction to defending yourself.

Well, lower case Whats going on?... you are obviously an ASIC employee and your clear bias is exactly what upper case WHATS GOING ON is referring too. This comes from the top - people like Kell and Medcraft before him. If you start out with a belief that advisers are doing the wrong thing, its not long before you start labelling the whole industry as broken, which is exactly what Kell, Medcraft and others have done. When the Royal Commission finds that ASIC has massively failed in its oversight role, ASIC will use that as an excuse for more money and more power rather than a true introspection about its failings. The truth is that ASIC is dysfunctional, at least in its role of financial services oversight. The most uncomfortable truth in this whole sorry saga is that advised clients highly value their own advisers, and generate better financial outcomes than those without financial advisers. Tough to reconcile that fact if all advisers are bad/poor or whatever as ASIC suggests.

Sorry, while that would be a convenient narrative for you I am not an ASIC employee. No bias, just empirical evidence from 16 years in the industry, 16 years that has taken me right through the financial services chain and well outside the small, unrepresentative pockets of back patting PD days that represents the extend of wider industry knowledge most advisers are exposed to. I too was on the other side once, believing the industries ills are simply a reflection of a few bad apples. As per the above post, the evidence simply doesn't support that notion. But alas, you fail to actually grasp (or refute) the point made, you simply launch into disputing the rule based on the exception. ASIC may well be dysfunctional, but clearly no more so than the FP industry it seeks to regulate. Also, never has the regulator stated that ALL advises are bad, that is your own straw man. Until WE (yes we!) grasp that concept and accept the structural failings of the industry as a whole then we will continue to struggle and perhaps even self destruct if this RC commentary is anything to go buy.

Kell two words: State Super. When are you investigating with full transparency on the methods you use, resources you commit and issues discovered? Anything else makes you a world class hypocrite.

If a review offer is made to a client and they do not take up the offer then the issue remains with the client. Goodness me! Is ASIC suggesting we need to physically drag a client into a review appointment? I'm pretty confident this would amount to kidnapping. Just because a client opts out of a review meeting doesn't mean the adviser is no longer providing a service!

This issue is not about inviting clients for reviews and the client not taking them up. It is about the adviser undertaking to deliver a service and being paid to deliver the service and then not delivering the service.

If you deliver the service you deserve to be paid for it. Conversely, if you don't deliver the service then you don't deserve to be paid.

ASIC's pursuit of this seems very reasonable and I can't understand how any adviser can suggest they should be getting paid for services not delivered.

If I buy a ticket on a plane and don't turn I get my money back? The airline has done it's calcs on selling so many seats on a plane. If I buy an annual gym membership for 12 months and don't go to the gym I don't get a refund. I've determined fees based on client numbers and not AUM and provide a range of services during the year in addition to a face to face review service. Hence if someone dosen't turn for a face to face review it's unfair to all the other clients to refund all or part of the fee. Clients get FDS, opt in, fee on fund managers statements. I they don't feel they get value then they can end the relationship.

I completely agree with you Sir!

Fantastic stuff! No doubt you refer to yourself as a professional, vigorously defend the advice industry as a profession? but then go on to defend the business model by using airline tickets and gym memberships as the benchmark for acceptable practice? lol, Financial services certainly doesn't have a monopoly on cognitive dissonance but it certainly has a penchant for it!

BB, have you ever heard the saying, "You can lead a horse to water but you can't make it drink"? I find it extremely unlikely that you are able to get all of your clients to be engaged all of the time. This comment assumes of course that you are actually a financial adviser and practitioner. Your comments suggest not.

No, whether clients choose to engage or not is just a component of this debate. And for the record, the regulator has accepted in the past that genuine attempts to offer the service charged for DO COUNT as having provide it. But little details like that don't tend to matter to keyboard warriors whose sole industry/regulatory experience doesn't extend beyond their own firm or licensee.

My point relates to comparing a professional services firms to airlines, gyms or used car lots! Those types of analogies are both incompatible with the "we are professionals" tag line and instructive as to just how some practitioners think! They actually believe that the business model from 10 years ago remains acceptable, that a few pieces of new compliance paperwork and they should be left to complete gods work (plenty of licensees hold the same view!). It's that attitude that continues to drag the industry through the mud and by extension, the genuinely professional advice practice's with them.

Review fees will need to be turned off in the future, I imagine after 2 years of attempt at contact. They will put some sort of rule or law in place off the back of this. You can't just send a review letter for 10 years and continue to collect a fee for service where the client doesn't respond. It is the difference between selling a product vs acting professionally.

Where have you been Bozo its called FDS and Opt in, some of these clients amp are talking about are legacy clients by the name and nature ie pre Opt in so they dont need to, however most of the clients these days are on SLA agreements which means FDS every 12 months and Opt in every 24 months, please be aware of current legislation if you make these comments.

My comments are in regard legacy clients and the majority of the clients are still on pre opt in arrangements. Why? Because businesses don't want to upgrade them to opt in! It will take years for the old legacy clients to come to opt in structures. I am saying that in light of the Royal Commission, grandfathering will be ruled out, all clients will be subject to opt in immediately, or the fees will need to be turned off.

What about the financial risks involved. AMP (like all AFSL's) have to carry the financial risk and pay PI premiums for at least 7 years after any advice is given. Someone has to pay for this cost. Of course it could be loaded into the initial advice fee, but that would often add a significant cost increase to the advice and make it less affordable. I would be happy to stop charging clients every year, if I could stop paying for PI insurance for them. But my understanding is the law says I have to hold PI insurance to cover every bit of advice I give. Hence I have costs for at least 7 years..... What do people think is a reasonable solution????

At the heart of the problem is the decades old practice of advisers receiving payments directly from client investment/super accounts and insurance policies. Until this ceases (and it doesn't matter whether it is labelled as a commission or "adviser service fee") this problem will persist.

As long as it is possible for an adviser to paid for doing nothing there will be plenty of advisers taking advantage of the situation. For decades this was the business model of choice for most of the advice industry. It was built on it and many still feel "entitled" to operate this way. Go out and sell product and let the commission income stream roll in. Ban commissions on super and investment accounts. No problem, replace it with an adviser service fee being drawn every month.

Advisers well understanding that the majority of people don't look at the transaction statements for their super/investment accounts or understand that commission is an optional cost component of their insurance premiums (yes optional, as a true fee for service adviser will remove it). We know clients often don't know how much they are paying or what they are paying for. Exploiting the situation cannot be viewed in any way as professional. It has to stop.

The widespread exploitation of consumers is what ASIC is bringing to light and they should be applauded for doing it. The community reaction, which is overwhelmingly in condemnation of the perpetrators (Big 4 and AMP) is confirmation these practices are not acceptable to the broad community. It's also naive to think that the Big 4 and AMP are the only ones doing it.

Add new comment