The new system will be introduced during 2020, for both its aligned and employed advice networks, who are being notified today, AMP said in a statement.
At the start of an annual agreement, the client and the adviser explicitly agree the services to be provided and fees paid, an arrangement that expires after 12 months.
The move comes following a recommendation from the Hayne royal commission earlier this year that laws should be amended so that ongoing fee arrangements must be renewed annually by the client.
AMP Australia chief executive Alex Wade said the move to annual agreements was a step forward in the evolution of its financial advice business.
“We have been considering the best way to charge for financial advice and factored in a range of issues including client sentiment, pending legislative change, operational matters and increasing compliance requirements,” Mr Wade said.
“We think annual agreements best serve the interests of clients who want advice over a period of time.
“There are many ways that Australians want to experience financial advice. We believe there is a strong need for enduring relationships between clients and advisers, as well as more episodic advice and ad-hoc advice, where digital solutions will have a role to play.”
Mr Wade said annual agreements will ensure optimum transparency in the relationship between clients and advisers, while simplifying administration and compliance for advisers.
In addition, he said the change was being introduced over 12 months to give clients and advisers time to adjust.
“We recognise this is an adjustment for many advisers and we’ll be helping them with guidance, tools and templates to help implement the change in their business,” Mr Wade said.
Episodic advice, thats a new one. I wonder how many meetings it took to come up with that. Ever tried to paint over rust? Or push crap uphill? And you also get paid 100s of thousands a year to do it. But the question is, can you live with youself after retirement? For many the answer is no, as really who wants to hang around with someone that ruined so many advisers practises? Funny when you leave a high powered position and are no longer high powered ,many if not all of those hangers on will leave you. So execs maybe instead of throwing the rest of us under the bus, you could just resign and do something else, that dosent effect so many peoples lives just to pump up a share price and your own bonus.
Nothing wrong with the idea of annual fees and I think it has some merit but the interesting thing will be whether AMP can manage to get the document signed by the client under 50 pages or if it is like everything else that they do in that it takes you three hours to document.
[quote=Anon]Different person than the original poster, but similar
We have clients sign annual service agreements at the end of year progress meeting. At his meeting we both agree what we/they will do over the next 12 months. Following this we send an invoice and they pay using their reference code. No big deal and probably adds another 10 minutes work. I am happy to absorb this cost, and any talk of having to increase fees to do this is BS.
Similarly, I haven’t had any clients complain about the extra admin. On the contrary, they love that we are upfront about our fees and we talk about what we will be doing to help them. We still have the option of having fees paid through Super if the client needs, but most pay direct.
There are some clients (about 10%) that decide at this point not to continue with ongoing advice. We see this as a good outcome as we don’t want to be charging fees just because we did some work for them a few years ago.
Happy for you to resist the inevitable, but change is coming whether you like it or not.
Sounds like the best option right there.
How’s the look-back going?
the general public will benifit from the new system and it is there money
I’m still waiting for the service agreement template promised to Charter advisers back in 2013.
AMP has got it right
The clowns running AMP have for years blatantly broken the FDS / Optin Laws with utter contempt for the Advisers that are now suffering under ever increasing BS red tape regulation.
Now such AMP executive clowns want to make up the law further themselves to an annual Optin.
Nice work AMP execs, can’t wait to see you all lose your jobs as the AMP ship finally sinks.
The next step is abolishing advice fees from super funds, then watch all you rats scatter.
That’s cute, do you understand what it is we do?…
There’s only 20,000 odd advisers predicted to be 15,000 by end of education roll-outs…. compare that against 20+million people in Australia. I’ll take my pick of the people who CAN pay, there’s literally no scraping the bottom of the barrel here anymore.
I have NO problem charging for advice out of pocket if the government wants to make it harder for people without the cash-flow to access advice. I turn low end clients away every single day and have plenty of higher net worth clients who will pay because they understand the complexities of advice.
EVERYTHING they’re doing is just taking advice away from people who need it the most and that’s lower income / lower financially educated families. I’m at the point now where I honestly say bring on the $10k per year clients and make life simpler.
I’m happy to accept the ones you send away. They are my target market
That’s a really stupid comment and reflects a lack of knowledge as to 1) the interaction of taxation laws,2) GST credits 3) the age pension system 4) the tax deductibility of advice fees inside and outside super depending on various personal tax rates. However after seeing some StatePlus super statements showing advice fees as Nil despite advice fees being charged I can certainly appreciate the angst.
while you thugs keep earning salaries & bonuses via the Intrafund racket.
“other” so called professions give you something written on the back of beer coaster saying the fee is $xyz. We should not be compared to those. The financial planning industry after Compliance lawyers get their hands on it have to provide a 2000 page FDS and Opt in document whilst standing on your head, rubbing your stomach and somewhere in that process you need to talk to clients about their goals, aspirations, kids etc etc. The second concern is I’m over this Government intervention and no doubt Treasury and ASIC will once again define the period, define what a service, define what colour my Knickers should be whilst handing out this document etc etc.
the future… sign’em up for $$$$ big bucks upfront.. move onto the next one.. when you come back to me.. then I will hit you with another big $$$$…. looks like the dumb ass lawyers who know nothing about this industry are brining their perverse legal culture here.. Goodluck
So what will a financial planning business now be valued at?
$0. It’s entirely transactional now.
good one AMP
This will be the final straw for our AMP business.
We have over 100 clients that we have offered a review for every year…many which never reply.
They have been with our firm for over 10 years and know that when ever they do need something they just call or email.
But asking them to sign an agreement and return it each year and it simply wont happen.
So now we will be required to turn off their fee.
This will close our business.
Very very sad.
If you are not seeing them every year what are they paying for – how can you make changes to their strategies and portfolio’s without seeing them?
If they are not feeling as though they need to come in every year, they probably don’t need to come in, the strategies you have in place must not need adjustment. So why not charge on an hourly basis for work required and go about finding yourself some new clients who have more complex needs that would require ongoing service.
Your clients sound like they are not engaged, so why are they ongoing clients? I think we all need to realise that clients CAN be transactional, they may only need to come in once every few years for various things. Or they may be very complex and involved and hence able to justify an ongoing service.
This is nonsense and classic fee for no service – you better hope they dont complain or you will be paying back some big bucks.
LOL Let’s rephrase what you just said
“My business is going to close because, we don’t actually provide any advice except when they need to call someone who sits at a desk, once every undefined period”
Classic fee for no advice.
Goodbye Dinosaur
LOL i bet you don’t make more than a bus driver 🙂
Who cares what I make?
What I make doesn’t define my self worth.
What’s the logical extension of this?
Super wealthy people must be sooooo much more valuable than bus drivers?
A bus driver at least has a use – he or she can get you to work, or get you to the airport.
What an amazing sense of entitlement that you have, that the working people of Australia who have their superannuation in their already overpriced underperforming retail funds (fact, parliamentary enquiry determined this, not me) do they really “deserve” to retain your entitled self to sit at a desk and answer a phonecall every 6 years – but for the other 5 get nothing.
I can go to sleep every night knowing that I didn’t rip the shirt off anyone’s back.
sounds like you are a salaried & bonus drip fed Intra-Fund market sales rep paid out of the admin fee rort (that their members cannot opt out of) run by the Union Super Funds.
Definitely not what I do. I do not provide advice – I have though – I do have a little business that I run and I am also trying to build another little business – so I know what it feels like to have to go out there and make money, when I saw the insides of the sausage maker though I realised that I didn’t want to be the one serving it up.
Thanks for your input.
There are good advisers out there, don’t get me wrong. There are advisers who are worth their money.
I think the whole intra fund advice thing is a bit of a rip as well – but I do believe industry super funds are better than almost every other retail fund out there.
But i mean cmon are you defending the bloke that literally admits to fee for no advice?
There are other valid criticisms of the system too like why do all the little guys get banned when the big ones get EU’s and fines only.
WBC and its AUSTRAC breaches is another example of this.
[quote=Anon]LOL i bet you don’t make more than a bus driver :)[/quote]
Clearly showing your motivations, which has nought to do with your clients and everything to do with you milking as much out of them as possible.
I assume you are joking, but fear you are not.
If this is your belief, then please understand that this is the exact reason Government is putting all this crazy regulation on us.
If you take fees and provide no service, you don’t have a business. You have a scam.
This is the exact reason it’s needed
There is absolutely no business under the sun that would be willing to state publicly I charge people a fee to know where i am and ring me if they need something but other then that i don’t service them, can’t even be bothered writing them a letter
For all those who say this is fee for no service etc and the reason we have all this government regulation, please explain to me why Industry Super, which is charging all members for advice, yet is afforded exemptions from the corps act?
you wont get an answer for that as no one knows
oh boy, everyone has said it already lol but I’d close up show NOW and if you plan on staying in business report yourself to ASIC and breach yourself because you can’t hide that up…
We have been doing Annual Service Agreements for three years – no FDS and no opt ins, and approved by our compliance team – and the Licensee has been advocating people consider changing to this. It is much more efficient and would recommend doing this.
Wouldn’t you stil
l need an FDS?
No. You only need an fds where an ongoing service agreement of more than 12 months is in place.
Interestingly you can also charge the initial advice fee upfront, and then have a repayment plan of that fee in place that can be longer than 12 months. In that case you also do not need optin or an fds.
that is NOT correct… whoever told you this doesn’t know what they’re talking about… You ABSOLUTELY need an FDS even for 12 months because the point of the FDS is to show WHAT you paid for that 12 months AND what services were actually provided for that 12 months. I’d be fixing that up quick smart…
Actually you are incorrect. Straight from RG 245.
RG 245.4 The FDS obligations were introduced as part of the Future of Financial
Advice (FOFA) reforms under the Corporations Amendment (Future of
Financial Advice Measures) Act 2012.
RG 245.5 Fee recipients must give clients an FDS on an annual basis, which discloses
information about the previous 12 months of their ongoing fee arrangement.
An ongoing fee arrangement exists when a retail client is given personal
advice and the client enters into an arrangement with the adviser, under which
the client is charged an ongoing fee during a period of more than 12 months:
see RG 245.20–RG 245.24 for a full explanation of the term ‘ongoing fee
arrangement’.
RG 245.6 The FDS obligations must be met for all retail clients who have entered into
an ongoing fee arrangement. This includes both pre-FOFA clients and postFOFA clients: see Table 1.
No mate, trying to circumnavigate the law doesn’t work here.. FDS has to show what they received full stop. You can’t create an 11 month and 25 day agreement and say that’s fine I don’t need to disclose. You need to ask – What was that 11 month and 25 day agreement? (which is your engagement sign off to begin with) THEN did you meet the obligations of it? (which is the FDS) if so did any not get met and what refund is the client entitled too.. If you’re charging an “ongoing fee” on a monthly, fortnightly or quarterly basis you HAVE to meet FDS obligations. The ONLY way to circumnavigate this is to charge adhoc fees at time of work being done.
Be careful what you’re touting here and pulling one line information from RG’s the real world application doesn’t work like that.
That was my understanding too.
If you’re not doing FDS I assume you must be invoicing them annually and they pay from after tax earnings outside their product. I’d be interested to know:
– How do you find the extra admin burden of issuing invoices, monitoring non payment, chasing non payment, and reconciling payments when made?
– Have you increased your clients’ fees to cover the additional costs associated with this?
– How do your clients feel about the extra admin associated with manually paying invoices every year?
– How do your clients feel about not being able to pay for super advice using super money?
– How do your clients feel about paying the full rate of GST rather than the discounted rate that applies when fees are paid by platform?
Different person than the original poster, but similar
We have clients sign annual service agreements at the end of year progress meeting. At his meeting we both agree what we/they will do over the next 12 months. Following this we send an invoice and they pay using their reference code. No big deal and probably adds another 10 minutes work. I am happy to absorb this cost, and any talk of having to increase fees to do this is BS.
Similarly, I haven’t had any clients complain about the extra admin. On the contrary, they love that we are upfront about our fees and we talk about what we will be doing to help them. We still have the option of having fees paid through Super if the client needs, but most pay direct.
There are some clients (about 10%) that decide at this point not to continue with ongoing advice. We see this as a good outcome as we don’t want to be charging fees just because we did some work for them a few years ago.
Happy for you to resist the inevitable, but change is coming whether you like it or not.
I’ve come across a couple of firms that have started charging one off work and slagging out ongoing fee businesses but some of those firms I would consider unethical pricks. Firstly does the fee for the next 12 months vary “significantly” from the last 12 months? (otherwise you’re breaking the law by trying to get out of Renewal Notice requirements). I’d be interested to also know the $ fees you’re charging per client? and further, do you have a gravy train of regular people coming in (large accounting firm or industry super fund) where you don’t have to worry about ongoing relationships. I’ve seen your model work well in firms where the typical client is a Gay CEO working in Pitt Street earning $500K and you quote $15,000 for the work. The point I would raise is every business is different, and so why say things like “change is coming” . Let’s go back 10 years and start debating fees v commission again can we. I would be keen to hear your model and I’m pretty confident it won’t work for 100% of advisers.
So your clients are effectively paying in advance for the next 12 months service?
How does it work for new clients? Do they pay your upfront fee and first year service fee at the same time?
Yep, they pay for the original work required to do the SOA and then once that is done if they want ongoing advice they pay for the next 12 months. Some pay this upfront and some pay each month. The important thing is that every 12 months we negotiate what we need to do for the next 12 months.
actually, I agree with this. they are usually not viable, so best out of your hair, or they come crawling back eventually.
Yes but that ends on 1 January 2020 at which point Standard 1 comes into play. What you’re doing is trying to “circumvent the law” by offering an ongoing service that is not longer than 12 months but is ongoing in nature and may be only say 9, 10 months or 11 months and 29 days and is then renewed. You’d need to clearly disclose this is once off advice, get signed evidence as to that, vary your remuneration per client, cost it out individually, get letters of engagement and annually provide a new fully complying SoA and only have a definitive break in charging clients fees. You would also specifically state you’re not providing investment advice because you can’t provide investment advice and not provide an ongoing service as that doesn’t meet your fiduciary obligations and or best interest obligations. You do all that to save you providing 2 documents being a FDS and Opt in…dosen’t make sense.
The legal intent of Opt-In is to prevent “disengaged” clients from paying ongoing fees when they no longer require the service. Signing a new service engagement each year (or less) is an alternative way of ensuring the client is engaged and requires the service. It complies completely with both the intention and the letter of the law. There is no breach of Standard 1.
And there is no legal requirement for a new SoA with each new engagement. RoAs are quite sufficient if provided by the same AR as the original SoA, and there has been no significant change in circumstances or requirements. Nor is there a legal/fiduciary/best interest obligation to provide ongoing service with investment advice.
Annual agreements are bad because of the extra unnecessary admin they create for both clients and advisers. As are Opt-Ins. But they are perfectly legal and FASEA compliant.
I don’t get the big issue with this. Why would it be reasonable to charge year after year and not provide advice? All other professional services charge for work done. If financial advice is to truly transform from a sales industry to that of a professional advisory service, then this seems like a logical step in the right direction.
I understand it will not be easy for some advisers but the writing has been on the wall for quite a while. If they don’t want to evolve then perhaps it is time to move on and do something else. The world of investment commissions is well and truly a thing of the past and is not coming back.
I know AMP has copped a lot of heat recently, but at least they are staying the course in financial advice and taking a leadership position.
Well said mate.
Advisers just can’t hack it, which is what happens when you’ve had it too easy (to the point of thievery) up until the last couple of years.
This actually looks okay from AMP.
Are you aware how Industey Super charge to provide advice?
“The world of investment commissions is a thing of the past”. The last time I looked at my Super Statement, Einstein, I’m pretty certain that all the fund managers were charging an asset based fee. None of them will be sending me an opt-in letter either. In fact, your entire post is rubbish. Go see a suburban solicitor, or call him up or ask for a copy of a document and see what that costs. In time, a great deal of the public will come to realise what this all means for them – and it isn’t more affordable advice. That’s assuming they can find an adviser.
AMP take a leadership position? A lesson in futility.
So I will also wait for my Super fund to contact me each year to see if I want to keep paying the admin & investment fees? As a matter of fact I will wait for every service I subscribe to, to contact me and get me to opt-in in each year…..
They are a product, not a service.
The SERVICE of investing your money!
I guess they have capacity to do this given they won’t have any clients left.
Turn up, be part of ruining the industry then bring in something that most have been doing for a long time and expect a pat on the back.
? ?????
I think the Titantic’s (AMP & IOOF) have already taken on too much water ….. too late to batten down the hatches, they are already sinking .
Totally agree
What will AMP offer clients that want ongoing service not just an annual advice document ?
Another anti small business adviser ploy. Only the BANKS, IOOF and AMP have the resources to renew agreements every year
Not true. Absolute Advice has had annual agreements since 1 Jan 2019. It take less resources than ongoing as it’s just one document per year instead of annual FDS plus Biennial Opt-In.
Do you think that complies with Standard 1?
You must act in accordance with all applicable laws, including this Code, and not try to avoid or circumvent their intent.
Really. There are a lot of small businesses in the AMP and IOOF networks.
Get over it.
If you’re not seeing your clients yearly and can get them to sign an agreement, then move on,.
Standard 1: You must act in accordance with all applicable laws, including this Code, and not try to avoid or circumvent their intent.
Less paperwork? you need to give a opt in, fds, ROA or SOA and get a new csa signed every 12 months, this is more work you numbnuts. Good luck with the robots. Got to love how everyone as in management who caused most of these issues in the first place just bend over on this 12 months thing. No one fights it, we just say yes ok its not law yet, but lets get all our advisers to change their businesses anyway. All because they are trying to get the spotlight away from their stuffed up history and improve the public perception of the company. This is destroying advisers. We can change , but this change is too much too quickly. What if annual opt in dosent eventuate? why do we just let these things happen? Its embarrasing to be in this industry sometimes, we have people committing suicide, but we don’t say hey lets take some pressure off them for a while, no we go full bore to destroy what little resiliance those that are left have left…..what a joke this is. The EMS and GMS of a lot of these companies have a lot to answer for, and I for one hope their chickens turn into emus and kick their north shore front doors in.
An FDS and Ongoing Service Agreement is only required for payment arrangements that exceed 12 months. If the arrangement automatically terminates unless there is signed contract, then there’s no need for FDS or OSA. Clearly, clients will need to be provided with enough detail to make an informed assessment but it should minimise the workload for well-run practices. Of course, if ASIC take the view that successive annual agreements contravene the anti-avoidance provisions there’ll be problems but, despite the Melbourne negativity, i don’t think they’re likely to do so where consumers’ interests are clearly prioritised.
Thats not correct, the form will include csa, fds and opt in and it needs to be done annually, ask your dealership. None of this resign in 11 months 25 days stuff, thats against the coe, and any dealership accepting that type of shennanigans will be in trouble.
This isn’t the place to offer you legal advice, but you’re fundamentally misunderstanding the law and the relevant legislative instruments.
Incorrect. Opt in and FDS are not required with annual agreements.
See Standard 1, you’re clearly trying to circumvent the FDS and Opt in requirement by having an ongoing arrangement less than 12 months, i.e every 11 months. That trick was a good one from 2013 till 2019 but it’s over.
spot on… funny how Management have passed all the crap to small business. Hope the job losses are massive and people complain when they get no personal service.. Yep, the numbnuts in ASIC and Govt might actually understand the shitstorm they have created