In a letter to Western Australian senator Linda Reynolds, financial services minister Jane Hume said the government was “committed to enhancing the financial advice OFA framework” to address the risk of fee-for-no-service misconduct revealed by many of the major financial institutions during the royal commission.
Senator Reynolds had made representations to Ms Hume on behalf of Roxburgh Securities adviser Steve Blizard, who has been a staunch critic of the reforms to advice fee renewals passed by Parliament earlier this year.
“Under the legislation, consumers will receive an annual forward-looking summary of the fees that they will be charged and the services they will be entitled to receive,” Ms Hume said.
“Fee recipients will need to obtain their clients’ written authority prior to arranging the deduction of fees from a client’s account.”
Cost impacts listed in the explanatory memorandum of the new laws, which come into force on 1 July and were a response to the royal commission’s final report, estimate the compliance costs to the industry for reforms to ongoing fee arrangements will total $28 million.
However, Ms Hume said the additional restrictions were necessary to assist advice clients in making more informed decisions on the fees they were being charged.
“These new obligations will help clients in an ongoing fee arrangement to determine whether they are receiving services commensurate with the fee they are paying and ensure that fees are not charged ‘invisibly’,” she said.
“The government considered carefully the feedback received last year on the exposure draft of the legislation and made corresponding amendments in order to minimise compliance costs for advisers without weakening protections for consumers.”
Ms Hume added that the industry had “generally reacted positively” to the amendments made before the bill was passed, including the merger of fee disclosure statements with annual renewal of ongoing fee arrangements and relaxed requirements around the dates that advisers must seek client consent.
The Liberal government has overseen the dmise of affordable financial advice in Australia
Someone suggested voting Labor next election, now we all know how incompetent they have been in the past, but they could not make as bigger mess than the “ Dunderheads” who have stuffed up the current system
How these Federal MP’s put their heads on their pillows at night and sleep with a clear conscience just staggers me.
Senator Hume’s comments here are so inaccurate and ill-informed. There’s not a more transparent industry in Australia when its comes to remuneration disclosure now than the financial services industry – bar the banking and industry superfund sector that is!
Please enlighten us all Senator Hume – what other industry anywhere in Australia tells people BEFORE they even begin a massively complicated process, just how much money they’re being paid for that work? Can you name even one?
Australia’s non-bank / institution / industry superfund Financial Advisers are expected to provide that information before any confirmed solution is even determined, then as a definite figure when the final solution is finally confirmed.
That information is signed off by the client and contains all the information possible (as both percentages and dollar amounts now that we’re forced to also treat clients like 5-year children) as well as ongoing fees and charges for the solution constructed..
Where’s the hidden fees and charges Senator? Where??
Dear Senator Hume, please resign immediately. You are clearly not up to the task. The lies you are telling and the damage you are doing to the industry MUST STOP!
Your comments about fees being ‘charged invisibly’ are a disgrace. Where did you get this information? Did you make it up? Have you spoken to a single practicing financial adviser about your additional 12 month opt-in red-tape?
All ongoing financial adviser fees must be disclosed in:
1) a financial services guide;
2) a letter of engagement;
3) a statement of advice;
4) the direct debit form or product application form
5) a record of advice (which must be provided annually);
6) a fee disclosure statement; and
7) the statement provided by the client’s bank or product provider (at least once per year).
That’s a minimum of 7 pieces of disclosure in the first 12 months for a new client, and then a minimum of 3 disclosure documents every year thereafter. Invisible? NO. Adviser service fees are the opposite of invisible.
Have you spoken to her about this? I doubt she reads these comments.
I have sent emails. What more can I do? Hopefully others who post here do the same. At the end of the day, she has the power and is making these massive and disruptive decisions, so the onus is on her to reach out and engage with practitioners and also conduct research into the impact of these reforms. She is making the same mistake as Kenneth Hayne. ie. Only consulting with a handful of corporate types who are many steps removed from the actual delivery of advice. The end result is disastrous overreach with damaging consequences for consumers.
It’s well known that lawyers struggle when it comes to counting…
$28mill costs.
What a load of utter crap.
Let’s see the coatings on this Ms Hume.
Your lies, policies and ever increasing BS Red Tape costs are a disaster to Advisers and clients.
You are off your head saying Advisers are happy with this. BULLSH#T
What planet are you on Jane?
Before these regs the client gets their fees disclosed;
– In their SOA
– A signed Fee Agreement
– An annual FDS
– Opt-in forms
– On their super statements at least twice a year
– Access to their account to look for themselves anytime
How many more times does it need to be disclosed and agreed too?
Worst minister ever. Also the Digital Economy minister! And all she’s given us is more client “written” authorities.
No she is the least worst, 1st worst was O’Dwyer or Frydenberg or Scotty from marketing. I am so confused, so much competition for first worst “Yes/No Minister” amongst the Libs.
More absolute rubbish by a politician who’s merely putting on a front for political reasons rather than looking at the full impact of all this adviser bashing.
If you REALLY are so concerned about professionals receiving fees (or payments) for no work done Senator Hume, can I suggest then that politicians like you (and all your other misleading colleagues) make all the filthy under the table deals you lot do in your profession, known to the public! Seriously….talk about the pot calling the kettle black! This is just hypocrisy at the highest level.
I’m not a planner but as I see it, advisers deserve every cent they get paid these days with the nightmare you and your predecessors have created for the entire financial services industry the last decade Senator Hume – especially one K. O’Dwyer. Its unworkable and no-longer financially viable for many advisers now – hence the mass exodus.
The perfect scenario you fools are trying create, where every client transaction goes perfect while the adviser gets paid near nothing yet is still 100% accountable for anything that DOES go wrong, isn’t possible while humans are involved. Understand that. Yet that’s the idiotic world you’re trying to create with the mountains of mountains of legislation we now have to wade through.
([b]As a footnote:[/b] Seeing as our industry is so concerned about transparency and honesty, how about IFA update the picture it continually rolls out whenever an article relating to Senator Hume is published to how she actually looks now instead of when she first entered politics years and years ago?
100% correct
My thoughts are that we are moving to become a profession. We will have a code and should be monitored by our professional bodies and peers. We don’t need a regulator who has no understanding of the commercial pressures faced by the advice industry. Clearly the regulators are failing the industry. The professional advisers that are left in the industry after the 31 December 2021 should be rewarded for embracing continuous change and given a chance to prove their professional status not lowered to the lowest standard by those that tarnished the industry. No other profession has to provide this type of reporting and disclosure to their clients – we are treated like salesman still. Oh how I wish I was a real estate agent!
Don’t you think the real risk of having to pay back clients fees in the event that services are not provided is incentive enough for advisers to to the right thing and service clients What this does in the real word is provide clients with an 11 month clawback on fees if they decide to terminate in the 11 month before a the adviser has a chance to provide an annual review. I won’t even talk about the FASEA requirements ensuring clients provide informed consent etc etc etc.. Legislative overkill.
First all I say thank you to my AMP colleagues for the new AMP legislation. Let’s remember the Royal Commission showed that at the board level, Senior Executives of AMP made a conscious decisions to not turn off advice fees for clients of departed advisers, in order to avoid triggering Opt in. Or employed CBA advisers under management were charging dead people fees for 10 years. We heard no cases of Mr Consumer that belongs to Joe Average Advice firm committing these offenses. Why is the existing legislation that works, and we’ve gotten used to being made even worse ([u]fixed[/u] anniversary date) when a large insto at Senior Management level did the crime? Advisers have no representation, we’ve been let down by the FPA that are on the payroll of these instos.
Fantastic. Now if Minister Hume could kindly turn her attention to the hidden commissions earned by mortgage brokers, you may actually be doing the consumer a service; or is she scared of the mortgage brokers’ industry association, which doesn’t roll over like a puppy to have its belly scratched?
Mortgage broking commissions are not hidden. They are fully disclosed. They don’t add anything to the cost of the product either. Consumers still pay the same interest rate and fees if they go direct to the bank rather than via a broker. (Sometimes more actually, because brokers can often negotiate a lower rate). Mortgage commissions are a cost to the the lender of outsourcing much of the application work they would otherwise have to pay for inhouse.
and retail super funds also used to pay advisers a commission. These commissions were fully disclosed ina SoA. There were fully disclosed. It was a marketing expense that clients did not pay either and were also fully disclosed..the commissions paid to advisers were also to cover the cost of setting up the fund and providing admin costs….can’t tell the difference sorry….I guess that’s why every client I see that goes to a mortgage broker ends up with a line of credit…and five years later they still have the same debt level?
yep a mortgage broker did that to me years ago when I first bought a house. NEVER AGAIN
The Liberals and Senator Hume believe in the Nanny State.
She is also inept, because it is not just getting the client to sign an ongoing form, it is tailoring that form so that any product provider will accept it and pay the actual fees. This will cost the industry far, far more than $28 million. Who on earth comes up with this stuff – public servants are really dumb.
Come on Jane, your nose is growing.
– Where are the facts supporting your statements?
-Who are these people who welcomed what you have facilitated?
– Are they lawyers, bureaucrats or someone else with a vested interest?
– Have you actually looked at what it is you are seeking to provide “visibility” over?
The client sees their account on a regular basis and can see exactly how much they are paying their adviser.
There are no hidden trails anymore.
The client can exit any day they like to and turn the fee off.
Jane,
please talk to someone who actually understands what is happening in 2021 already and stop trying to deal with a problem that was eliminated already.
p.s. you do know Jane that the institutions, like AMP and others, turned off the advisers remuneration under the old model and made out that they, the institution, were giving something back to the client when all the institution did was take from the adviser to give to the client. The institution actually gave nothing up themselves. Misrepresentations about fees by institutions, Who would have thought?
You know those same types of institutions your predecessor is now working for.
p.p.s Keep up the fight Steve Blizard. Thanks for trying in the face of outright ignorance and/or people who have their own agenda, which certainly is not consumer focused.
Hi Michael, you will be pleased to know that I’m only just getting warmed up. This ridiculous red tape is making it much harder for low income earning women to get access to high quality advice. It is simply inept legislation, as it currently stands.
Sorry Jane, I will not be voting Liberal. Industry Super able to charge all members for advise and not required to provide advise, no requirement for FDS etc. As far as I can tell, you are Labor supporting Industry Super.
must be a secret industry that has generally reacted positively. your ears must be blocked Jane Hume. then this should apply to every contract where fees are derived in Australia as financial planning clients must be really dumb as they are the only ones that do not know they pay fees unless they sign a tree of documents to acknowledge.
Yes, BUT Jane why didn’t you consider multiple entity clients who require 5 consent forms (per person per account) and 35 pages (Asgard) when they know the fee. There is still a gap in the technology that the regulator is unsure of ?! The truth is also you are merely theoretical and do not have the gumption to lead effectively, none of you for that matter, and that equates to commercial disrespect. Clients will be annoyed also. It’s about MAKING THINGS WORK EFFICIENTLY too you moron ..
The more difficult the government makes for an adviser to do their job the less of us there will be in the profession. How is this different from a paid streaming service? Someone dies they will still be charged the monthly subscription fee. I say introduce the ongoing fee to all business such as paid subscription providers such as telstra, optus, vodaphone, netflix, disney, stan, optus sports foxtel, origin energy, AGL etc, etc.
Have we ever had a minister who is so utterly deluded?
Well we’ve got Scotty from Marketing as PM….so it figures the rest of them should be equally hopeless….
Presume this article has been posted to inflame advisers emotions. The endless additional red tape is clearly making advice only accessible to the rich, to say that the industry had “generally reacted positively” shows how deluded the regulators have become. Those who can’t afford advice will be served by robots (robo advice), imagine the catastrophic outcomes if the algorithms have issues like the Centrelink debacle.
I have since responded to this letter from Minister Humes. I am now waiting for her reply. Not sure where the “invisible” fees are coming from, given that Fee Disclosure Statements have been in effect for years. The only “invisible” fees I am aware of currently are the ongoing intra-fund “advice” fees being charged to millions of super fund members, which was inserted into the Hayne2 legislation. And I’m not sure how imposing $30+ million pa in ongoing red tape is reducing costs to members.
Why are the Liberal so supportive of Intra Fund Advice Fees for Industry Super? Is it the Liberals or are they just stupid and listening to Treasury?
The Liberals can’t do anything about all the union super rorts because they don’t have the numbers in the Senate. Labor and Greens will always block anything that tries to curtail union power. Lambie, Hanson & co are so dumb they’re easily persuaded by the union super lies.
Understand we are all are sick of disclosing fees what feels like 43 times a year. Customers think the government are crazy with all the paperwork they have to sign just for us to be be paid. They real issue here which Steve points out is the “invisible” fees by ongoing intra fund “advice” These are no different to trail commissions. It is fee for no service. We want a fair playing field. We need some clarity and need to fight one point at a time and I think this is one the moment. Happy to support Steve.
I can’t help but notice that Mr Blizard is yet to pass his FASEA exam (fasea website) and doesn’t appear to meet the education requirements (FA website). Sounds like another dinosaur who doesn’t get the new world of putting his clients first before his hidden fees. As we’ve discovered, our clients LOVE the transparency and accountability. Probably why the phones are running hot…
What exactly are “hidden fees” big Trev?
To be fair, I’ve just noticed that my name is not on that list, despite passing and holding a certificate. Something fishy with FASEA, but really, who’s surprised?
Neither am I and I passed it on the 16th June last year. Just checked my certificate
Hey Big Trev, there are no hidden fees mate, except the “fees for advice” charged to ALL industry fund members.
Who’s the dinosaur?
You may be correct in your guesses about Steve’s education, but they are nothing more than guesses because there is no way to tell from the public record. The FASEA website only lists exam passers who have given permission for their names to be published. It’s not mandatory to be listed on the FASEA site. The FAR website only lists FASEA education status once the required education is fully completed and the adviser’s licensee updates the register. This is not mandatory until Dec 2025.
Fact: FASEA Exam deadline 1 January 2022, not in breach. FACT: No Hidden Fees read S962H Corps Act. FACT: Assertion of SB is hiding fees – raises potential for defamtory action. Steve is a consummate professional, like myself and we play by the current rules, otherwise amend S962H of the Corps Act. Your argument is unproven, unfair. and in my opinion unprofessional go read Standard 12 FASEA and may you might consider an apology and withdraw your comments
Agreed. We need to fight this together, not fight each other’ It is ridiculous only having 10,000 advisers serving over 26 million Australians. We need 30,000 advisers & we will still all be flat out.
Rubbish Big Trev, plenty of Advisers like me are disgusted in the whole FARSEA process and will not give them permission to post our names. They don’t deserve to use my name in any way.
Right policy (15 years too late) absolute disaster implementation.
Hi Big Trev. Mr Blizard HAS passed his FASEA exam in March 2021, after a disastrous experience with proctoring technology the year before during the Covid19 Crisis. Mr Blizard simply chose not to make it publicly available in that manner, simply in order for trouble makers seeking to look me up. I’m not particularly looking for new clients, as our phone is running hotter than yours. However Mr Blizard did publish his “pass” (whatever that means) on his personal LinkedIn site. And my ASIC register has been updated by my AFSL Licencee.
So the existing arrangements and their associated ongoing costs are clearly not working in any manner whatsoever? So why do we employ a person full time to produce meaningless client documentation if there is no value or client comprehension? What does that say about the current arrangements and the content attached?
May I suggest it isn’t the advisers who are left creating the problem but rather those who sold product and didn’t disclose the annual costs.
In our practice the average client would receive a Statement of advice at commencement, 12 monthly statements, a Record of advice for the review, a Record of further advice for a transaction, an FDS, and 2 product annual statements – 18 times in a 12 month period they are advised of fees and that isn’t sufficient for them to identify the value of what they are engaged in? Really Senator, how about understanding what it is you are doing rather than just bludgeoning away and increasing costs. Very soon there won’t be any advisers left to do the work so it all becomes moot – what a brilliant legacy that the most valuable resource Australians can access – financial knowledge – will be no longer! Bravo.
Senator Reynolds, call out Senator HUME on misleading comments. There is no invisibility in fees. Thats what an annual Fee Disclosure Statement is for and oversight by AFSL’s and ASIC would result in punitive outcomes.Yesterday I had to deal with 5 compliance elements in a client meeting: Identification renewal, FDS, Opt-In, RoA Authority To Proceed, AML/CTF screening – Risk Low. I;m with Steve Blizard on this. I will seriusoly consider voting Labor at the next election.
The intent of the legislation was to make the life of advisers a misery. It has been slightly improved from that but the intent hasn’t changed. It means that there will be fewer advisers as massive compliance is now a core competency, more work for advisers without real benefit for advisers – how much will essentially repeating last year’s fees add to the benefits a client receives? – and it will mean higher costs for clients.
A bit like biting off your nose to spite your face. You certainly have succeeded in spiting your face.
“Additional restrictions were necessary”?… I don’t thing so. Basically government saying we don’t trust advisers. Now a client will have to sign the same agreement multiple times. Take a typical semi-retired couple with a 1 super fund, 2 pensions, and 1 investment account. Each year clients will have to sign adviser consent form, plus super fund consent form, plus two more pension consent forms, and thanks to product providers like BT they will also be forced to sign an investment account adviser fee consent form. That’s 5 consent forms!
Why wouldn’t you just charge one fee direct to the client
Because it’s the only industry that charges ongoing fees, automatically taken from clients’ accounts without reminding them of the fact periodically…apart from statements that is…and reports…and clients having access to their investment and super accounts online.
Then there’s my old gym who’ve been apparently still charging me though I haven’t used them since 2012. No statements. No online access. No reports. No reminders. No notices.
But Financial Planning is the only industry who needs regulation……….
You also forgot the part where the client can opt out of the fee at any time. Can’t do that with with Intra Fund Advice fees – but Jane Hume likes these because clearly the Liberals are supporting Industry Super.
I think the Liberals have made a mistake this time around.
Perhaps we could introduce similar legislation regarding political donations. Political parties could transparently show and account for every dollar of income so we can then decide how effective government is at being impartial when making decisions and legislation. .
Cost the industry will be a lot more than $28m. It would be more than $28m for advisers, yet alone product providers!
How does an Adviser deal with the “invisible” service we give.
What about Intra fund fee’s clients are not being told about