In a statement, ASIC said it has received a number of breach reports from licensees that indicate they may have failed to comply with the fee disclosure statement (FDS) and renewal notice requirements that were implemented as part of the Future of Financial Advice (FOFA) reforms in 2013.
As a result, it said it is investigating these reports and will take enforcement action where breaches are substantiated.
“In addition to investigating these particular instances, the volume and range of breach reports indicates a significant risk of systemic non-compliance,” ASIC said.
“Therefore, ASIC will undertake a project that will test compliance with FDS and renewal notice requirements across the industry.”
ASIC said it will examine to what extent advice licensees:
- issue FDSs and renewal notices to customers;
- issue FDSs and renewal notices within the time frames set out by the law;
- include the required content in the FDSs;
- ensure the content of FDSs is accurate, for example, in describing what customers are charged for and what services customers have received;
- have appropriate procedures in place to ensure fees for ongoing services are discontinued when the arrangements are terminated as a result of licensees failing to comply with the FDS or renewal notice requirements.
Further, ASIC said its ongoing work on fee for no service failings in the advice industry has highlighted the importance of FDSs and renewal notices, which were designed to assist in mitigating future fee for no service failings by:
- FDSs enabling customers to gain a better understanding of the advice services they are being charged for and the services they are entitled to receive; and
- renewal notices, and the requirements for customers to actively opt-in before they are charged ongoing service fees, significantly reducing the likelihood of passive or disengaged customers being charged ongoing fees.
ASIC said it will test compliance with these obligations across a range of small and large licensees and will provide our findings in 2019.
Currently, it is investigating substantial breaches of these obligations with a view to taking enforcement action.
ASIC is also supervising remediation programs, which require licensees who reported failures to issue compliant FDSs to customers and/or refund and compensate customers for the ongoing service fees charged.
I must be in the minority as I think FDS and Opt-In are actually good for us. Found the FDS an useful instrument to reiterate my value statement. In other words, a client is reminded why they hired me and why they pay my fees. The Opt-In facilitates a simple client survey in that those who may be hesitant to renew gives me an opportunity to discuss their issue(s); notwithstanding, to date everyone has renewed.
The downside of both requirements is probably opportunity costs. Then again, it is far cheaper to retain a client than find a new one.
Agree with you 🙂 but isn’t it a shame that we have to legislate for our industry to have to disclose the fees we charge our clients. We should be doing it anyway. The issue I have with FDSs is that they don’t illustrate the total fees clients pay as a direct result of our advice…..assuming we manage their investments which there is an administration fee/s, and, investment management costs. Yes they are all in the copious amounts of pages in PDSs which no one reads however it is reliant on us to make it easy for our clients to understand.
Why not just force all to produce an invoice for services before payment. Like every other profession.
Would you also allow Industry Funds to charge a fee to all for Advice?
Of course…we should all be doing that as our only means of remuneration.
Is that like the legal profession which will take % of a pay out or the medical profession where you can swipe your Medicare Card?
ALL OF YOU ARE NOW SCREWED
Who cares about ASIC. Many advisers are leaving this ridiculous industry ruined by red tape and compliance cost and simply giving accurate, truthful advice unlicensed with no compliance worries at all and there is nothing you can do about it.
NOTHING. Jump in people the water is fine. Unchain yourself from these clowns running the circus and leave the industry. Give life advice independently for a fee.
In an era of internet access, clients already have easy access to look up fees, and FDS was an excessive requirement that achieved very little anyway, other than increasing compliance costs & work for advice offices.
Optin is another matter, and policing whether clients are being charged ongoing fees and receiving no service is a noble cause.
I have to wonder where ASIC will fall when clients have been provided services, and charged ongoing fees, but FDS or Optin compliance falls short. Surely if the clients received services they have implied consent through action? Thoughts would be welcomed as we move into a new era.
Not happening. In the eyes of the public/regulator, advisers are deemed guilty until proven innocent – even if we did provided the services for the fees charged.
FDSs are misleading in that:
– Whilst I understand the intent is to disclose the fees we receive for the service/advice we provide, clients assume that this is all they pay. It is vital fees are disclosed and communicated in a language and manner in which clients can understand. Advice, administration, investment management and insurance costs all on one page.
– During the initial on-boarding process. Say for example a client starts a relationship on the 1st of January and it takes 3 months before you start charging an ongoing fee, then the FDS will only show that you have received 9 months of advice fees. Then 12 months later the clients receives their FDS having paid a higher ongoing advice fee only because it is for a full 12 months. Wouldnt that be confusing to the client. And again it would not mention any of the other administration, investment management or insurance costs which they would be paying as a result of the advice which you would have provided.
Thoughts?
If the on boarding process is part of your ongoing service then you should be invoicing them for the other 3 months they haven’t paid you for.
If the on boarding process is part of your upfront service then the ongoing service commencement date (and hence the FDS date) doesn’t start until on boarding is complete. Some licensees insist on using the SoA signing date as the FDS date but this is just to make it simpler for them to monitor. As with many other financial advice issues, licensee compliance can be far more restrictive and demanding than the actual requirements of the law.
Legislation is one thing however licensee interpretation of that law is another.
The standard should be that “during the course of the calendar year there should be written evidence that the client was informed of the fees in which they have paid and services provided” They should do away with the FDS dates and time limits. Completely unnecessary.
Will this apply to the Tax Practitioners Board and also to ASIC. i.e Dear Adviser; you paid an adviser levy of $1,000 in 2019 and in return the services we provided was …turning a blind eye to the CBA which leads to more red tape.
The more complex and complicated you make the rules, the more easily they can be breached / broken. Make the compliance simple and clear.
If there is ‘systemic non-compliance’, ASIC need to be held accountable on this. They have continually failed to provide guidance to the advice community on FDS and Opt-In requirements. It seems to me they have preferred to leave grey areas so they can later catch advisers out. It’s a pathetic approach. It’s time for the media and the industry to call them out. I am aware of significant issues where licensees have received different legal opinions on critical FDS & Opt-In matters and when approached, ASIC has refused to provide guidance. It is an utterly intolerable position.
Yet again ASIC has imposed onerous requirements on financial advisers without considering the practical and costly effect on the industry. The reality is that the cost has to be absorbed by clients.
Ironic that ASIC left the bait of added compliance and is now going around to see who failed to keep up.
Honestly, do doctors or lawyers or accountants have this level of scrutiny? I’m an age where everything is available online and clients can see the fees they’ve paid at the touch of a button, it’s overkill in my opinion. Clients also need to take some responsibility to check the fees they are paying.
Imagine if Product Providers could quiet clearly spell it out on their statements – “Fees paid to your Financial adviser $X.” Save everyone some time for the same result!
They already do.
And why would someone other than a client pay a fee for advice to an adviser? That’s the point being missed by many – that clients need to pay directly to show agreement with the payment. A third party taking a first party’s money to pay a second party is a nonsense that has cause almost ALL the problems alluded to on these pages. Fix it by doing what some of us advisers (and all other professionals) do – invoice client for work done. Don’t get paid by anyone else.
So ASIC gets exposed at the RC for basically being a pathetic entity and we see a ten fold increase in enforcement activity announcements.. look at the calibre of ASIC staff, a lot of big four and AMP experience, what qualifies any of these idiots to pass judgement on any AFSL’s activities?
Why doesn’t ASIC have standard templates that have to be used for FDS’s and also SOA’s and then there won’t be any breaches. Now that would clarify all and make life easier for all concerned and then AFSL’s can easily make sure all comply and there are no breaches.
that would then force them to stipulate exactly what was required. This would highlight how difficult this task can be and not be as appealing from a media perspective. Vague guidelines are so much better.
Can’t agree with you on FDS’, that’s really a client by client, firm by firm prospect on what you perceive is value and worth paying for etc.
Absolutely agree with you on the SoA front, standardise the bloody things! The corps act is the corps act no matter how many lawyers look at it – let’s get everyone in a room and settle this thing once and for all!
that would be too logical
Perhaps ASIC can investigate what is causing these breaches and encourage some amendments in the regulations to clarify so that it is easier to comply. I think AFSLs are trying to meet the spirit of the requirements but the technical complexity of aligning multiple product providers to a single disclosure day is the issue.