We couldn’t leave 2019 without at least one more adviser attack from the CBA and its wholly owned subsidiary Colonial First State.
As we are all aware the CBA was dragged through the coals by the royal commission and they have been blaming everyone but themselves ever since. While a few senior heads have rolled, middle management has been trying to appease the regulator by pouring responsibility on its advice networks and financial planners generally.
Their latest gambit is to feign corporate responsibility by introducing new rules for advisers who use their platforms.
Kenneth Hayne has recommended Trustees of superannuation funds should consider asking a client’s permission for fees to be collected from their accounts. Commissioner Hayne had little to no understanding of the existing processes that are in place to protect the consumer and he and his team were being presented with cases of largely self-identified problems that ASIC had investigated and remediated. The cases went as far back as 2007 and it is fair to say legislation has moved a long way since then.
Despite this, the CBA has decided it should pre-empt any legislation and start the ball rolling on trustee verification. They have written to licensees demanding their fee paying clients sign ‘their form’, which gives the trustee comfort that the client is aware of these fees.
This of course is ignoring the annual fee disclosure, which many of us have been doing since 2014, and the bi-annual opt-in requests, which has clients both agreeing the services they have been offered and the fees they pay. This ignores every advice document that has these fees fully disclosed in them and the applications that the clients sign to open accounts with these product providers.
We also have FASEA Standard 4 asking us to reaffirm our clients “free, prior and informed consent” as soon as possible after 1 January 2020.
The cost of this is being worn by the advisers and their practices and that is exactly where the CBA wants this new layer of costs to go as well.
The cost to the CBA has been, now wait for it, to design a form. That form needs to be signed by the clients and returned to the trustees. Having designed this form, who do they want to do the actual work? You guessed it, the adviser! All so that ‘the trustee’ can look good in the eyes of the regulator?
What is the cost to practices of this CBA virtue signalling? Let’s look at an example in our licence. This is only on First Choice so far but will be rolled out in 2020 to First Wrap clients, according to the CFS communications. This practice has been delivered a list of 66 clients they, not CFS, must arrange meetings with, get them to sign the CFS form and then send the hard copy to CFS. This ignores any review schedule this practice might have already arranged with their clients as it must meet the CFS schedule, not the practice's.
That is conservatively 70 to 100 hours of back office time. They will need to arrange meetings and prepare docs, meet and greet clients, follow up clients who delay or are unavailable and then send signed forms to CFS, and receive and file confirmation. Add to this the 66 hours of adviser time explaining why a client must sign yet another form.
An approximate cost for a non-legislated tick box for the CBA trustee, will equate to something between $17,000 and $22,000 not including lost productivity.
If it is so important to CBA and the regulator, why don’t they do it? The practice already does its job, with FDS and opt-in. Shouldn’t the CBA be doing this as it is about the manufacturer?
A last note before it comes up from the trustee will be, “well ASIC has just finished its review of FDS and opt-in and it was hardly glowing!” Well if that is their belief then it is another argument for it to be done by the CBA!
This latest exercise is nothing to do with the consumer and all about the CBA trying to look good, with their only cost having been to ‘design a form’, or at least that is what they think.
The real cost will quite rightly be future business as a once dominant platform shows its total disdain for its customers and those customers vote with their feet.
It is likely every licence will actively review their relationship with a manufacturer whose virtue signalling is going to cost their practices tens of thousands of dollars. All this to find a costless way (from the CBA point of view) to polish their very battered brand.
Paul Forbes is the chief executive of Australian Advice Network (AAN). AAN won ifa’s Best New Licensee in 2016 and Paul was awarded Dealer Group Executive of the Year in 2018.
Following the publication of this article, a Colonial First State spokesperson provided the following comment:
"The Government has outlined in its Royal Commission Implementation Roadmap that it will be introducing legislation in relation to advice service fees by June 2020. Over the next 12 months, we will be writing to members who are paying an advice fee requiring them to provide the trustee with an updated written consent to continue doing so.
"This also supports ASIC and APRA’s best practice guidelines set out in its letter to licensees in April this year.
"We are working closely with advisers to ensure they have early awareness and we will support them with contacting their clients to reconfirm their Advice Service Fees if they wish to do so."
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