Disclose fees at client engagement phase, says lawyer
As advisers prepare for the new Fee Disclosure Statement requirements to take effect from July, legal consultant Claire Wivell-Plater of The Fold says including fee information in client engagement letters will have a number of benefits.
In order to comply with the Future of Financial Advice reforms, advisers will have to have Fee Disclosure Statements that set out fees received in the past 12 months and also provide information about which services were actually provided.
“An engagement letter that clearly lists their services will make this simple and the list can be replicated in the FDS with a tick or a cross to show whether or not the service was provided,” said a statement from The Fold.
As well as simplifying the process, Wivell-Plater said providing FDS information in a client engagement letter will have legal and contractual benefits.
“After FOFA, the client will be responsible for paying the fees; even if they’ve provided a direct debit authority, they can revoke it at any time,” she said.
“An effective engagement letter will give advisers a contractual right to recover their fees.”
Wivell-Plater also said the common practice by advisers of including details of their service offering in a statement of advice (SOA) is not ideal.
“It’s not a great approach because as well as cluttering up the SOA, disclosing fees at this stage of the process is, in many cases, too late,” she said.
“For advisers to comply with the best interests duty, the client needs to understand and agree to any limitations on the advice in advance.”
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