This warning, issued by Adam McGuren, national manager, Licensee Select at BT Financial Group, came alongside the caveat that the FDS changes may also present an opportunity for advisers to re-evaluate their value proposition and use that to drive new business growth.
Under Future of Financial Advice changes, all advisers charging any form of ongoing fee need to clearly outline exactly what services they provided in the previous 12 months and how those are charged.
The Australian Securities and Investments Commission has outlined a “no action” policy essentially giving advisers a grace period with regard to existing client contracts for inadvertent breaches but this does not apply to new contracts put in place after 1 July this year.
McGuren told ifa he has spoken to several self-licensed principals who are still unclear as to what exactly the requirements are, and believes some are being given incorrect information.
“I’m worried that I’m speaking to businesses outside our network that won’t be ready,” he said.
“There is still a lot of confusion; many don’t know what’s going to happen and might not be compliant. There’s a lot of change that needs to happen.”
For example, there is confusion over whether the nominated service period should start from an initial consultation or when authority to proceed is signed. Some advisers are also not aware that where a client has an ongoing service proposition linked to a risk insurance commission but pays a fee for service on investment advice both forms of revenue need to be included.
With a maximum group fine of $250,000, it’s not something advisers can afford to get wrong, he said.
McGuren said the new FDS requirements could also serve as an opportunity for advisers to revisit exactly what their client proposition is, reaffirm that value and serve as a platform for growth.
Licensee Select has been offering adviser professional development days, webinars and half-day workshops, a client value program that has been attended by 80 advisers since its February launch, as well a program called “pricing advice” that has been completed by around 100 practices in the past 18 months.
Dave H…well I could sit back and accept it…or….I could lobby against it because it affects my ability to service more clients effectively. I don’t think I’ll need to change what I do….it’s just the extra paperwork on top of the extra paperwork. I was sort of hoping they might relax some of the compliance now that we’re all getting better educated and commissions is being weeded out. But no….bit by bit it keeps building. It’s Chinese water torture.
still trying to work out the purpose of the FDS, as all fees i charge clearly documented in the SoA and client who 100% fee for service have a private client agreement. How about asking the client how they would like to pay for your service, document it upfront and each year review it. why do you need to jusify your fees at the end of the 12 months??? the client need to know upfront & the service they are going to receive. This just BS
Gerry. You may have diff clients to me but I cannot recall a year where a clients goals and objectives haven’t changed a bit or where there has absolutely no need for any changes to a strategy or investment portfolio…
Anyway, I don’t disagree with your opinion, I simply feel that complaining about it doesn’t serve any desired client service or profitability objectives that I have for my business, so I just get on with the job of helping clients and making money (win/win).
If these changes will dramatically impact your ability to service clients or your profitability, you may need to consider adapting your business model.
Sure, it’s crap and unfair and etc, etc, but it’s also out of your control so you will need to 1. Accept it, adapt your business process/systems and mnove forward. 2. Don’t accept it and retire. 3. Don’t accept it, try and soldier on as is and watch your business go downhill as your focus is not where it needs to be.
Good luck.
Gerry, not related but we are both smart enough to get on with it. Flat fixed fees is the go. think about what you said. if the kitchen is too hot–remove yourself from the heat. I’m sure you are a good adviser but get wrapped up in the noise. Enjoy the day.
Geez Dave H and Dave W (related?)…do you just sit back and accept every piece of regulatory overload without question? Can’t we just do business with our clients without the extra unneccesary paperwork. Stuffed if i’m going to sit there and hand out version 22.7 of our FSG, fee disclosure statement, opt-in letter, engagement letter, an invoice, a fresh 25 page client data form….and then tell them nothing’s changed over the last year and carry on with the strategy. Insane.
NO POINT discussing the merits of what is now already in place. Time is better spent consider the most efficient way to run a business which adheres to new requirements.
I charge flat dollar fees. No commissions. I review every single client at least annually and at each review they will get their disclosure document (which will be real simple due to my fee structure) and also sign a new opt-in form – annually, in spite of actual requirements being bi-annual.
What I think of the change is irrelevant. It is here. It will add about 5 minutes of preparation to each review but no time to actual appointments as I am already having this discussion.
Accept the things you cannot change and get on with focusing on looking after clients and running an efficient and profitable business.
The legisation as it stands can best be described as ultra varies – ie not clear and concise and as such unworkable. Do you list attendance at PD as part of the service offer , do you list going to client funerals as part of the offer ? do you list reading reams and reams of reading to keep abreast of the constant fiddling that this government has engaged in as part of the service offer. As for the self righteous who comment on this page who think its just a matter of time management , have a good hard look at the service you are provinding as you seem to have time on your hands- something most advisers have very little of . No other profession puts up with this type of of onerous crap . The only saving grace is that those who have been in the industry for years know that ASIC cant enforce anything . I seriously doubt they could even manage a staff bar-b-q .
Gerry & Tony
No bundled fees just flat fees one disclosure no need for bundled fees one fee only less reporting less hassle more time for business
Both of you are correct, the big question is for many years majority of Financial PLanners have gone down the route of fees rather than bundled commision. Our clients are aware as they receive a FSG/Adviser Profile in Inital Meeting, Then Disclosed again in the SOA, the if they have a Investment/SMSF Cash Management Statement, see the Fee Monthly, Then the Platform Discloses Annually, Then upon The Annual Review/FDS. So David Whitely is 15 Times in one year enough now, can you leave the me alone now. All i want is to look after the few clients that are staying loyal to me after i have been forced to let staff go. let me please spend the rest of my life in piece and maybe i can spend time with my family now.
Dave W…i’m struggling to accept a requirement that was actually engineered by David Whitely ISN. I have no doubt that they saw where the honey pot of money was…(in platforms)…and targeted that sector. No FDS on bundled fee contracts or commission bearing investments. So, the hidden fees remain hidden and the disclosed fees get disclosed again…smells like a targeted policy to me. I don’t like blindly implementing dodgy policy that creates more paperwork.
Sometimes I think that people are putting their head in the sand and then expounding this sort of rubbish. Just accept the change, do what most do already—a letter of engagement listing the services and fees. When the time comes to produce the FDS–basically- here is what we said we would do–here is what we did and these are the fees charged. Each dealer group should have their requirements sorted well before the date. Take time to think about what is required–you may even realise that it is so simple–just a bit of time management.