New annual fee disclosure statement (FDS) requirements could result in advisers paying significant fees if they fail to successfully navigate the confusing requirements.
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.
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