Recent conflicted remuneration guidance goes “too far” and could result in a huge administrative cost to advice groups, one financial services lawyer has warned.
The Fold Legal managing director Claire Wivell Plater told ifa a client consent requirement contained in the Australian Securities and Investments Commission’s (ASIC’s) RG 246 guidance goes beyond what is required under the relevant legislative changes.
It was also added after the consultation period, she said.
Under RG 246, released on March 4, if an asset-based fee is paid to the Australian Financial Services (AFS) licensee, the licensee will now need the client’s clear and informed consent to pass on any portion of that to their corporate authorised representatives and advisers.
“In our view, consent is ‘clear’ if it is genuine, express and specific. Mere knowledge of the benefit, or agreement to proceed with financial services in light of a disclosure about the benefit, is not clear consent,” the ASIC guidance states.
Wivell Plater said the measure seems “unnecessary”.
“That will impose a very significant administrative burden on licensees which will add to costs,” she said.
The measure could potentially be met through an inclusion in a statement of advice or fee disclosure statement provided it meets the express consent requirements laid out by ASIC.
The cost of doing so would likely be incurred at an individual advice practice level as they will need to do disclosure, although principals could end up relying on their dealer group for assistance while software providers may also look to implement an IT solution, according to Wivell Plater.
Some advisers already provide some information to their clients about how commissions are distributed between the licensee, the Corporate Authorised Representative (CAR) and the adviser in their statements of advice, but until now they were under no legal obligation to do so, she said.
“The client’s main concern is the fee they will pay. I don’t see why, for an independent licensee, the commercial arrangements between the CAR and the licensee, or the employment arrangements with advisers, are the client’s business,” she said.
“It’s akin to being asked to disclose to clients how a business funds its expenses or what it pays its employees. These matters are really none of the client’s business.”
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 14 Nov 2018ASIC bans financial services representativeBy Eliot Hastie
- 14 Nov 2018Fintech should make advice ‘enjoyable’By Adrian Flores
- 14 Nov 2018Hayne commission driving adviser tech shiftBy Adrian Flores
- 12 Nov 2018InvestSMART launches maxed feesBy Sarah Simpkins
- 13 Nov 2018Advice demand soaring despite reputation hitBy Adrian Flores
- 12 Nov 2018Former premier, advisers sound alarm on sex discriminationBy James Mitchell
- view all