Advisers must take care to properly scope their offering in order to avoid over-servicing clients and getting caught out by the regulator, says Clayton Utz partner Randal Dennings.
“You don't want the client thinking they're going to get delivered a Rolls Royce and they get delivered a Mini Minor – and vice versa,” said Dennings.
As part of the conflicts priority rule contained in Regulatory Guide 175, advice providers must provide an appropriate level of service for a client's needs and not over-service the client to generate more remuneration for themselves or for one of their related parties.
Having a discussion about fees upfront can help avoid any issues arising, said Dennings.
“A Mini Minor price suggest you're going to get a Mini Minor … it's a very important discussion to have, and it makes it much more client-centric,” he added.
Planners who charge an hourly rate will have to take extra care not to over-service their clients, because financial plans often take a long time to put together, said Clayton Utz special counsel Samantha Carroll.
“With the new Future of Financial Advice [FOFA] reforms and the need to focus each piece of advice and tailor it for each client, it will probably take longer than it used to,” said Carroll.
Dennings said many of the financial planning businesses Clayton Utz are working with are looking to avoid charging clients for the extra costs that are likely to be associated with FOFA compliance.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Jul 2018CPA shuts financial advice divisionBy Reporter
- 20 Jul 2018Don't neglect AI, advisers warnedBy Tim Stewart
- 19 Jul 2018AMP unveils new in-house training programBy Reporter
- 19 Jul 2018Self-licensed adviser cops 4-year ASIC banBy Reporter
- 19 Jul 2018Hub24 to launch new core offeringBy Reporter
- 19 Jul 2018SMSF sector warns about advice ‘exodus’By Miranda Brownlee
- view all