Some flexibility and the possibility of a grace period have been canvassed as a means of the regulators assisting financial advisers in dealing with the proposed new 12-month renewal regime and fee disclosure statements (FDSs).
The Association of Financial Advisers (AFA) is later this week expected to issue a position paper on the new environment in circumstances where AMP Limited late last week announced it would be moving early to annual advice agreements, and where confusion exists amongst some advisers about ongoing fee arrangements.
Commenting on the issue, the AFA’s general manager of policy and professionalism, Phil Anderson, said that a lot of issues had arisen around the definition of ongoing fees and the reality that such arrangements could not be rigidly confined to 12 months.
He said that it was in these circumstances that the AFA had been examining the situation and examining whether it was feasible to inject more flexibility into renewal arrangements including, perhaps, a grace period.
Anderson said he believed the regulators needed to recognise the need for flexibility in circumstances where advisers were not always directly in control of how and when client fees were deducted from client accounts.
He said there might be merit in reviewing the origins of client opt-in and the original proposals contained in the Future of Financial Advice (FOFA) regime when the former Labor Government had originally proposed 12 monthly arrangements but moved to two-yearly on the basis of annual FDSs.
Anderson said there might be merit in returning to the original arrangement of an annual opt-in but no requirement for an annual FDS.
The AFA’s examination of the issue has come at the same time as advisers query major licensees on their options in dealing with the regime, including options for initial up-front advice fees and client repayment plans.