ASIC’s Report 636 focused on whether the fee disclosure documents provided to clients complied with the law and if not, the nature of the failures.
The review examined fee disclosure statements (FDSs) and renewal notices (RNs) issued by 30 randomly-sampled Australian Financial Services (AFS) licensees and their representatives.
ASIC required the 30 licensees to produce samples of FDSs and RNs for assessment. It collected and 1,496 FDSs and 373 RNs along with fee disclosure policies and procedures.
It found that more than half of licensees did not have effective processes to remind them when RNs are due or to turn off ongoing fees.
ASIC also commissioned a compliance consultant to review 176 FDSs in detail to determine whether the contents complied with legal requirements.
Of those FDSs reviewed in detail:
- 80 per cent did not include all the required information about services that clients were entitled to receive;
- 73 per cent did not cover all the information about services that clients received; and
- 44 per cent did not include the amount of each fee paid by the clients.
Non-compliance by fee recipients ranged from less material and technical breaches to more significant breaches, ASIC said.
The review also found that 7 per cent of the FDSs required to be given to clients by law were not given. In 35 per cent of the instances when an RN was required, an RN was not given.
ASIC commissioner Danielle Press said the findings have raised concerns about industry practices in relation to fee disclosure to clients.
“Our review has found widespread non-compliance with fee disclosure obligations across the sample of AFS licensees and their representatives, suggesting that compliance with the FDS and RN obligations may be an industry-wide problem,” Ms Press said.
“Consumers are at risk of receiving inaccurate fee disclosure statements or, in some cases, none at all. This is a timely reminder that while disclosure alone is not enough as a consumer protection mechanism, transparent and timely disclosure still has an important role to play.
“The 30 licensees in our review have been advised of our concerns, and we are strongly urging all AFS licensees to immediately take steps to improve the robustness of their compliance measures.”
ASIC also noted that it is investigating a number of other advice licensees for potential breaches of the FDS and RN obligations. It will determine whether court action is appropriate at the end of these investigations.
The legal obligation to provide FDSs to clients was introduced as part of the Future of Financial Advice reforms in 2013.
What not cancell the licensces of the dodgy big banks or AMP? No fines, no remediation, just cancellation of licenses like they did with Dover?
80% ….
ASIC maybe instead of the industry being broken, your laws are stupid?
Easy fix – get rid of this requirement that no client values.
Non-Compliant? Does ASIC still have the “sample” 12 page SOA up on their website to guide us? HOW THE HELL CAN THEY TALK ABOUT NON-COMPLIANT DOCUMENTS!!!! LOL
ASIC you are always going to be a joke…..
Can’t you guys get the hint, just get out of advice.
Just get out. FASEA is a farce, all adviser groups are a farce, every big group is conflicted and corrupt.
It stinks. The whole thing stinks.
FDS are all in breach, almost EVERY SOA and be nit picked to death through hindsight.
Every wrap platform competing for your project
Do something else productive with your time.
Or just become a wealth coach.
An FDS is wrong if the amount shown is one cent too high or too low.
ASIC, if 80% of FDS’s are wrong why not make everyone’s life easier and produce some correct templates.
Canberra bubble bureaucratic bumbling BUFFOONS !!!!!!!!!!!
ASIC has some clear double standards here. I’m not complaining about the 44% of FDS that didn’t set out the fee. Like WTF’s going on there. But hang on a moment…Saying 80% of FDS don’t properly set out services highlights a double standard. ASIC has clearly defined a “service”” in Info sheet 232 and justification of fees as a production of a Record of Advice or a SoA. Whilst sitting on a phone line to Centrelink for two days, liasing with Solicitors and Accountants and or visiting someone in Hospital to assist with a Carer’s Allowance application, speaking with a wife whose husband is dying about what needs to be done financially; is insufficient, NOT a service or would require external validation. Now in this report they’re saying 80% of FDS had deficiencies setting out “services” provided. The only “service” to be provided under ASIC earlier interpretation is the production of an RoA. This is where we need a NEW association, representative of all advisers, free of conflicts of interest to come back to ASIC and say enough red tape is enough.
100% agree with Amanda Hugenkiz. The service we offer clients, and results in the referrals that have been the lifeblood of our business for over 25 years, are motivated by the care we have for our clients that extends far beyond a technical ROA and SOA. Someone needs to explain to ASIC that we charge an ONGOING SERVICE FEE and clients value the service we provide not how many ROA documents we create for them.