Presenting advice fees eight ways looks ridiculous to clients

The corporate regulator’s advice fee disclosure requirements is the biggest issue for advisers at the moment as having to present fees to clients eight different ways from a client’s perspective looks ridiculous, according to an adviser.

HH Wealth director and financial adviser, Chris Holme, told Money Management he was feeling good about the industry as a whole in terms of education and standards but how the industry was doing it was a roundabout way.

“The Australian Securities and Investments Commission’s (ASIC’s) guidance on product fee disclosure is fine but as it stands at the moment, if I see a new client I’ve got to provide the financial service guide which has my fees presented on it, then I’ve got to get them to sign a terms of engagement letter which has my fee on it, we then present them with a statement of advice which has my fee on it,” he said.

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“If they decide they want ongoing advice we have to provide them with ongoing advice agreement which has my fee on it, then we have to present them with a fee disclosure statement which has a fee on it, and an opt-in renewal which has my fee on it.

“We are presenting the fee to clients in six different ways plus you’ve got to get direct debit request signed and a product fee as well.

“I’m obviously doing that but from a clients’ perspective I feel it looks ridiculous.”

Holme said as having to present his fee in so many different ways could confuse clients he made it a point to explain every single one.

“I’ve had a couple clients ask me ‘Why are you telling me this so many times? Are you trying to tell us not to go ahead?’,” he said.

“They are just as frustrated as I am because they also have to sign all of them and it’s a lot of work for the one outcome.”

Holme noted the amount of paperwork was taking time away from actually servicing client needs or providing quality advice and this led to a huge group of people that could not access advice as it led to higher advice costs.

“We have to turn away clients because if we can’t charge them our standard fee, we are not making a profit. There are clients that need advice but can’t receive it because they can’t afford it. This is in direct correlation to the cost that it is to provide advice now,” he said.

Holme said his business turned away one to two clients a month due to this reason.

However, Holme said advisers could turn this burden into a positive by looking at it as progression towards being a professional industry.

“There’s going to be cowboys in the industry that are going to leave meaning we’re going to have better compliance, leads, and more sustainable businesses,” he said.

“Advisers who are frustrated should talk to other advisers to see how they are kicking goals and look on the positive side because being an adviser is a pretty good job.

“It’s a huge waste of energy always being frustrated, and advisers should use that energy to find clients and move forward.”

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'Are you trying to tell us not to go ahead?' ha ha, your client nailed it. That is precisely why ASIC has pushed these requirements onto us. They don't want clients to engage in ongoing advice and this is exactly what they told the RC. Consumers are demanding it, but ASIC knows better apparently.

What did the ASIC rep call it???? “The long tail” shows exactly what they view it as. Should we start calling the ongoing ASIC fee that has no transparency “the long tail”

Some ASIC executives will use this story as justification for a performance bonus. It is exactly what they've been aiming for.

ASIC would be delighted with this nonsense. They are chock full of cold hearted lawyers, failed financial advisers and former paraplanners and compliance staff. They look at financial advisers, with a client base full of happy clients who trust them, and they turn green with envy. Every layer of red-tape, or damage done to a financial adviser is a win in their eyes and the continual damage done to consumers is merely collateral damage.

I agree totally, Chris. Then add in the multiple ways you have to disclose those fees within the SoA itself. Is there any wonder that clients get the impression that financial advisers are nothing but fee gougers? New clients are totally bamboozled by the various fee schedules over multiple pages, you can see the mental gears grinding way, asking "And then?"

As an observation to those who may believe my comments are those of an industry relic trying to keep trails - we have run a 'fees' practice for more than 20 year, only about 10% of our revenue ever came from legacy trails, since about 1998. Even then it was for those smaller clients that may have been with us for MANY years, and a more 'commercial' fee arrangement may be too expensive for them.

We need to refuse to pay ASIC ever increasing Levies and refuse to keep duplicating stupid useless compliance docs.
Quite simply we ALL need to tell ASIC to go and get stuffed !!!!!

Nice idea but it won't work. Most will pay and if a few don't, they will delight in charging extortionate interest and eventually shut you down. The only way to fix this nonsense is to keep voting out the government of the day, and use our collective power and influence (which is substantial if we work together) until the Government wakes up and takes us seriously. They care about marginal electorates, they care about religious groups like Hillsong etc. Why? Because they impact elections. This is the only language spoke in Canberra. I'm not a member of AOIFP, but I will be following their leadership on this

Is it just me or does the only thing ASIC seem to care about is how much we charge someone to look after them ?? Disclose this! disclose that! repeat ? It is absolutely ridiculous that we have to obtain permission every 12 months and i will guarantee that within 12 months this will spread to trail commissions on risk products provided it remains at all.
There are a few issues to be dealt with by the vast majority of advisers including what i have just mentioned and going hand in hand with the removal of commissions all together from risk products being a very viable possibility !
I personally think they will go { i truly hope i am wrong } but this current pending ASIC review is just another reason i believe so many have not attempted the FASEA exam. Why would you if its "all over " we struggle to survive now to get rid of Commissions will be the final knockout blow for the retail Life Insurance Industry.

We just paid $6,500 cash for a laser eyes surgery.
The fee was presented to us once on an a-4 sheet.
We are ok with this because we know that we entered a contract and that we are insured, they are insured, there are laws and we can always lawyer up.

Instead of trying to patch the industry with more compliance, perhaps it is worthwhile to teach basic contract law & finance in year 12.

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