According to AIOFP technical panel chair Lionel Rodrigues, consent forms should be “abolished”. However, as they were a recommendation coming out of the Hayne royal commission and this is unlikely to happen, there is a path to a compromised version that can work for both advisers and clients.
“Commissioner Hayne made 76 recommendations of which 34 related to financial planning. Amongst those recommendations were provisions for consent forms,” Mr Rodrigues said.
“These consent forms have dramatically increased the administrative burdens for the professional financial planner with a subsequent increase in costs. This should not be underestimated as the process is neither simple nor straightforward.
“Constant follow-up of clients is necessary and each product provider has their own interpretation of what should constitute an annual fee consent form.”
The current proposal in the first draft legislation from government’s Delivering Better Financial Outcomes package of reforms, released in November, suggests combining the annual fee consent form and the annual fee disclosure statement, with Mr Rodrigues recommending also including the annual opt-in form.
“In the absence of abolishing this consent, my professional opinion is the three current forms should be incorporated into one standard document, verifying ‘consent’,” he said.
“That this consent form be a once only document signed by the client and kept as a written record for audit purposes.
“The consent form should be given to or transmitted to the client for their records and for transparency purposes.
“This once only consent form should be a document between the professional financial adviser and the client. It should not substitute as a de facto fee payment authority to any product provider or superannuation fund as is the situation currently.”
Further, Mr Rodrigues argued that there should not be a requirement to renew the combined consent forms annually, rather a new consent form should be signed when there has been a change in the substance of the advice that would incur additional fees.
“The client can revoke consent at any time. Upon revocation, the professional financial adviser must cease accepting such previously consent to ongoing fees,” he added.
“Under such circumstances, the client has terminated the relationship. There should be no requirement for the adviser to confirm termination or revocation of the consent form.
“The maintenance of the consent form, as discussed, is similar to that which currently exists with the annual opt-in form. This is retained by the financial adviser to evidence an ongoing relationship.”
Mr Rodrigues said this streamlined approach would “significantly reduce the administrative complexities in managing client files”. Additionally, it could lead to savings for product providers, as they would no longer need to monitor fee consents.
“The relationship of advice is between the client and adviser. It does not involve any product provider such as a superannuation fund,” Mr Rodrigues said.
“A once off Fee Consent Form, signed by the client and retained by the financial adviser, would relieve all product providers of the burden to monitor or assess payment of ongoing fees. For the product providers, there are cost savings.”
This provision is also in line with other advice associations, such as the Financial Advice Association Australia (FAAA) and Stockbrokers and Investment Advisers Association (SIAA), which have also called for a removal of the requirement to provide a product issuer with a fee consent form.
“A standardised fee consent form will only deliver productivity benefits if product issuers are required to accept it,” said FAAA chief executive Sarah Abood in its submission to the draft legislation consultation.
“As they have already invested in systems and processes to meet this requirement, it is unlikely that product providers will change their approach without a legislative requirement for them to do so.”
According to the FAAA, the way forward is to either remove the requirement for product issuers to verify client consent for every account or require product issuers to accept the standard form as evidence of client consent.
Ms Abood said the FAAA’s preferred method would be the first of these options.
“We now believe that the only sensible way to move forward is to remove the requirement for the fee consent form to be provided to product providers and allowing them instead to operate a sample-based audit regime,” she said.
The SIAA’s submission echoed these sentiments, arguing that the requirement for product issuers to be sent and accept the client fee consent form for the fee to be paid adds unnecessary complexity to the process.
“Our members support the principle that underpins the requirements – that clients are aware of and consent to the fees that are charged for the services they receive,” the SIAA submission said.
“However, the current regulatory framework has introduced additional cost and complexity for clients; facilitates anti-competitive outcomes; and thus the principle has become obscured.”
If Peter Johnson. Can pull this off he will be trust into financial planning folk law
The real solution is to only submit an agreed (online) consent form when an ongoing fee beyond 12 months is established. When that fee amount changes, only then is the form is updated. That could be 5 years later, potentially, as part of an instalment fee system. If the fee remains the same, there is no need for a new form.
This process as outlined is similar how all overseas jurisdictions operate, except for Australia. Time to bring down the cost of red tape on consumers (& for the super fund trustees) and adopt a simplified authorisation system. None of our clients are asking us for more red tape. Rather they are desperate for our services to be available at an affordable cost, which to do so must involve eliminating ANNUAL fee consent forms.
I wish! because it seems our politicians have more pressing things on their plate. Even though it makes all the sense in the world. make it part of stage 2 of the QAR changes.