In its submission to ASIC’s consultation around fee consents and independence disclosure, the AIOFP said changes to fee opt-in requirements should be pushed out to 1 July 2021, as immediate changes would add an unnecessary level of complication for advisers and clients given the current circumstances.
“The current COVID-19 global impact, when combined with the pace of change for our industry in recent times, strongly suggests any changes should be delayed until 1 July 2021 and the transition [period] for all clients should be two years,” the association said.
“This will assist consumers and advisers to meet the proposed requirements within the client’s current review cycle and combat the unknown COVID-19 fallout confronting us all.”
The submission also called for the streamlining of disclosure documents if further fee consents were to be brought in, while also pointing out that the short turnaround times for clients to opt in to ongoing fees were largely unworkable.
“It makes sense to have only one document covering the [service] agreement, renewal notice, client consent forms for product providers (e.g. trustees), including fees and services for the upcoming year, based upon the client’s current situation,” the AIOFP said.
“It also makes sense to have a fixed 12-month anniversary date for client renewal, but with flexibility to renew within three months of the anniversary date to cover unforeseen events like holidays, illness and pandemic situations.
“Only giving clients 30 days to confirm with the renewal of the agreement will not be satisfactory if they are inconvenienced with illness, holidays or any other distraction.”
Pace of grandfathered revenue closure should slow
In a separate communication to members, the AIOFP said it had also written to the corporate regulator requesting it to work with financial product providers to slow the pace at which grandfathered revenue was being closed down, given many clients would face increased fees at a time when they could least afford them.
Late last week, the corporate regulator told licensees it would not ask product providers for data around advisers still receiving grandfathered revenue during the COVID-19 crisis, which the association’s executive director, Peter Johnston, said could be because “they are sensing a backlash from consumers who are starting to realise that the cost of advice has escalated”.
Mr Johnston told ifa that six of the major product providers in the advice market, including BT, MLC, BlackRock, AMP and Colonial First State, had all removed grandfathered commissions from their products in the last six months, well ahead of the industry deadline of 1 January 2021. IOOF was the only major institution to have confirmed it would not remove grandfathered revenue before the deadline date.
“All this is doing is causing advisers to charge their clients more to cover their costs or consumers are opting not to seek advice, a clear danger in these unprecedented times,” Mr Johnston said.
Preposterous! This makes far too much common sense! And we all know financial services and common sense in the same sentence is simply ridiculous. We need to move ahead of legislation, like AMP. Let’s ntroduce enough red tape to paint the town red – and then add some more for good measure. Let’s add Annual Agreements to the mix while we’re at it. Oh, and why not cut-off grandfathered revenue in May, right in the middle of COVID meltdown? Sounds supportive. AMP seems to make their own rules … and then break them when they see fit. This is how financial services should be run, by big companies who simply don’t give a brass razoo.
Pushing out changes to fee opt in requirements makes perfect sense given current circumstances.
I also thoroughly agree regarding streamlining fee disclosure requirements. There is too much doubling up between Fee Disclosure Statements, Opt in notices, ongoing service arragements and product consent forms and it just creates confusion for the clients.
Good to see the AIOFP standing up for FInancial Advisers and the good work and value they provide in times like this.
Yes AIOFP seems to be doing a much much better job that the AFA and FPA. Can’t understand how De Gori and Kewin still have their jobs.
We need to go further. We need all of the industry bodies to be calling for the scrapping of Statements of Advice, at least for any advice not involving commissions or in-house products. With FASEA stamping out conflicts of interest, Statements of Advice are no longer necessary. Consumers pay through the nose for these documents, but most don’t read them. They are written solely for ASIC and licensee compliance officers. Everyone in the industry knows this. It is time to call a spade a spade and stop this nonsense.