The Fold Legal managing director Claire Wivell Plater told ifa a client consent requirement contained in the Australian Securities and Investments Commission’s (ASIC’s) RG 246 guidance goes beyond what is required under the relevant legislative changes.
It was also added after the consultation period, she said.
Under RG 246, released on March 4, if an asset-based fee is paid to the Australian Financial Services (AFS) licensee, the licensee will now need the client’s clear and informed consent to pass on any portion of that to their corporate authorised representatives and advisers.
“In our view, consent is ‘clear’ if it is genuine, express and specific. Mere knowledge of the benefit, or agreement to proceed with financial services in light of a disclosure about the benefit, is not clear consent,” the ASIC guidance states.
Wivell Plater said the measure seems “unnecessary”.
“That will impose a very significant administrative burden on licensees which will add to costs,” she said.
The measure could potentially be met through an inclusion in a statement of advice or fee disclosure statement provided it meets the express consent requirements laid out by ASIC.
The cost of doing so would likely be incurred at an individual advice practice level as they will need to do disclosure, although principals could end up relying on their dealer group for assistance while software providers may also look to implement an IT solution, according to Wivell Plater.
Some advisers already provide some information to their clients about how commissions are distributed between the licensee, the Corporate Authorised Representative (CAR) and the adviser in their statements of advice, but until now they were under no legal obligation to do so, she said.
“The client’s main concern is the fee they will pay. I don’t see why, for an independent licensee, the commercial arrangements between the CAR and the licensee, or the employment arrangements with advisers, are the client’s business,” she said.
“It’s akin to being asked to disclose to clients how a business funds its expenses or what it pays its employees. These matters are really none of the client’s business.”
Whether the cost is significant appears to hinge on what ASIC really means by “clear” consent.
Claire is sugesting that “clear” consent may require more than mere disclosure.
That is, irrespective of any past disclosure practices, I think she is warning that RG 246 may require additional procedures (e.g. client signing a document that proves clear and informed consent was given.) The cost of implementing procedures to ensure that all clients give such consent, filing all such consents, and updating all such consents as necesary to satisfy ASIC and PI insurers could be significant.
So the big question is: In ASIC’s view, does disclosure = clear and informed consent?
Have a nice day.
Jim Stackpool…more certainty? How much more certainty could my clients need…i charge percentage based fees that are disclosed in $ and %, transparant, agreed upon and (get this)the client understands them. My remuneration is linked to their wealth. They like it, they understand it. I charge a fixed fee for upfront advice or advice that doesn’t require product. Flexibility is the key here. You go stick to writing articles and i’ll keep looking after my client’s life savings in a manner that is entirely appropriate.
Charge like accountants and lawyers…pfft…different type of service arrangement don’t you think? Sick of the fixed fee FoFA brigade masqeuarding as working in their client’s interests.
Interesting, I see another issue that has not been raised. Many dealer groups are having the fee for a defined service paid from Regulated Superannuation fund accounts. My observation is that some of the service contracts I have seen are not superannuation specific , which implies that the fund trustee may be in breach of SIS. It would seem to me that all adviser agreements need to be vetted by the trustee to insure that the adviser service are Superannuation related.
The supposed ‘very significant administrative burden’ for licensees could possibly be considered against the very significance confusion and costs consumers have suffered for years paying percentage based fees. Any initiative that provides consumers with more certainty regarding the dollar costs they pay for advice should be welcomed. The greatest certainty surrounding monies paid to ‘representatives’ (even the terminology can’t disguise how much of the old world is still very relevant today) would be provided if ASIC took the path taken by APES230 proposed accoutning standard which prohibits any product or asset based fees.
That will impose a very significant administrative burden on licensees which will add to costs, she said.
Pull the other one Claire. Never heard so much BS from a legal mob. Dealer groups will just amend their software to include this data – a one off cost of a thousand $, or so, for the potentially hundreds of planners. A few $ each as a one off cost.
She is smoking the good stuff, I fear. Or looking for that 15 mins of fame.
Ms Wivell Plater states, ‘some information to their clients about how commissions are distributed between the licensee, the Corporate Authorised Representative (CAR) and the adviser in their statements of advice, but until now they were under no legal obligation to do so’.
What about the leglislative requirement in CA s947B(2(d)and s947C(1)(e)??
An SoA must include information about remuneration (including commissions) that is to be received, and might reasonably be expected to be or have been capable of influencing the providing entity [the AR or the licensee]in providing the advice. The remuneration that must be disclosed is that received by; the providing entity [the adviser], the adviser’s employer [the CAR] and the licensee.
RG175.172 states ASIC will administer the law on the basis that all remuneration received, by the parties stated in the law, must be disclosed in an SoA. Also see RG175.180.
Advisers who are salaried only on need state they are salaried.
I agree with the overall argument but the cost is likely to be minimal as disclosure in the SOA and subsequent disclosure in the annual fee document would be templated procedures. IT has gone all too far overall, though and unlikely to fix the problems of the past.