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.”
Well written Paul and spot on! Thanks for a great read. Cheers.
You are a disgrace CBA, you and you alone was over 50% of the reason for the RC, every single division at one stage inc ComSec had an EU on it, you are getting out of the train wreck you have left the rest of us now with, so why don’t you just Nic off now totally and do us all a favour, you make AMP look like a saint CBA??
Paul, your article is not going to age well once all other superfund trustees roll out the same – just ask them. They are on notice from ASIC/APRA refer to this publicly available letter:
https://www.apra.gov.au/sites/default/files/apra_asic_letter_oversight_of_fees_charged_to_members_superannuation_accounts.pdf
I do hope your role within the AAN licence is purely ceremonial as perpetuating this victim narrative is not helpful. My licensee was foreshadowing this 3 years ago. Also, for the the people in comments now declaring a mass exodus from CFS product, how exactly does that fit in with your BID obligations?
Why didn’t your licensee start raising this issue then. Why didn’t they bring to attention the advantages of having fees paid by super, Why didn’t your licensee start working with super funds for an effective method to handle this method. One simple form for Super funds, opt in could be used, why didn’t your licensee start lobbying the government for a Standard process. This “process” just highlights how much CFS has gone down the drain and clearly CBA don’t give a rats now. It’s a very timely article to prevent other super funds doing the same mistakes that CFS have done in this mess.
Super fund trustees have had a gut full of fee for no service scandals. The days of bowing to advice groups is over.
Fee for no service scandals. You mean four Banks (CBA and dead people), AMP and State-plus. Maybe it’s advisers that should be having a gut full of large licensee’s being owned by banks and these firms being involved in the advice chain.
Advisers have had a gutful of supporting super funds and receiving no loyalty in return. The distribution model for super trustees is dead. When was the last time you received a referral from a super fund trustee? Never. It is all one way traffic. What business in the world expect treats their distribution with contempt and survives ?
You are so brave posting as Anonymous
Brooke the tone of your response highlights the problem. The mess we are currently in is in large part caused by the instos thinking they know best and putting themselves above clients and the advisers that support them. The instos suck at client service and will therefore die at the vine as they cut themselves off from their distribution. The many advisers that were around before the banks entered wealth management know that very well. We received an email from Macquarie during the holidays demanding that we prove that we had a relationship with a client who dropped into our office to sign a withdrawal form which we emailed to Macquarie. Sadly a leopard cannot change its spots and we are now faced with the reality that these instos will now become the ASIC lapdogs. They do not know the meaning of service. Their mantra is profit, their structure is process driven and they have no track record in understanding the nuances of serving clients.
I think CBA and CFS have done enough to ensure that it’s not in anyone’s best interst to deal with them.
Paul, the problem is some clients don’t get the FDS or the offer of an annual review – as some advisers don’t abide by the rules. The trustee has a duty of care to make sure the fees are rightfully and lawfully being deducted from the client’s account. Trustees operating on the assumption that all advisers are delivering the ongoing services they are being paid to deliver has not worked and will never work.
But I agree fee disclosure has become ridiculous – at last count adviser fees are disclosed in at least 5 different documents (SOA, FDS, terms of engagement, service agreements, product account statements). The duplication of fee disclosure required is just disgraceful. Why can’t the trustee email clients and obtain consent by a return email from the client?
The instos still don’t get it. They have now drawn a line in the sand. It is them ( out of touch trying to engage directly with consumers despite crucifying their reputations ) versus us ( advisers offering personalised advice and service ). They are in a fight to the bottom as they have no choice but to keep competing on price while advisers will put their finger up to them and work out solutions that exclude the instos from their business model.
Have a look at its compensation for errors in the First Wrap account this one was for period 30/9/10 to 29/2/12 for a deceased estate 31/3/16 -ETP has been paid out – have not even taken into account that the payment in 2019 will require another tax return nor offered compensation for this – to many headless chooks without any one with knowledge. Remember the good old CFS days before CBA !!!
This has been a disgrace by CFS and has literally made us start looking elsewhere to partner our firm with – it is a stab in the back to advisers, the very people who referred the clients to CFS
As an adviser that utilises the FirstChoice platform this has already started to impact me and is an unnecessary adminstrative burden.
AFA & FPA please get your act together and consult with CFS around a possible solution to this unnecessary burden.
A dog’s breakfast and more will follow, 2020 is looking like a crap year for planners and great for lawyers.
About time that planners get off their backsides and ring their local members of Parliament. Perhaps get your spouse and support staff to do the same. We only have ourselves to blame – too stupid to fight and to trust that our associations will do the heavy lifting for us!!! Its only when politicians think that they will lose votes that they actually might take the time to listen. The whole industry is a circus. Just 1 question – so Mr ASIC how will the average Australian be better off with this reform??????
RING YOUR LOCAL MEMBER
I have called and tried to see my local federal member Ken Wyatt and he won’t see me.
This is what Financial Planning Associations are for. They lobby the Government & market participants for positive change for their members and all Australians. Not to bury Australians and Planners in added costs and paperwork that sit on clients kitchen tables and go unsigned. The issue is here is that CBA Financial Planning is a member of the professional partner program and the FPA acts solely for Product Manufactures in return for cash payments and promises of member fees paid in bulk. How’s that relationship working out for you FPA members? How about you put down that FPA cupcake and scone at that next conference and shoot off an email to the FPA?
In my experience you post letters to 100 clients, you’ll get 20 back at best. Who goes to Australia Post and posts a letter these day? Super funds experienced this lethargy first hand with Lapsing Binding Death Notifications with a 3 year expiry period and the response rate of getting new ones signed was terrible. It forced them to lobby the Government to change. CFS have totally stuffed this up and I hope heads roll for this. If they gave me time and notification yes I’d get letters signed over the natural client review cycle, but for it’s going to mean letters sent in February and another firm sending out letters in March and another in July. It will also mean my phone will ring like crazy at some mystery date with the first things clients will say [i]”What’s this 4 page letter I just got, we just signed a letter for your fees (opt in) with you last week/month/last quarter… do we need to sign it again?[/i][i][/i]
Without doubt, I will not put any more clients into CFS, and instead will move clients away from them.
We already are, multi-millions flowing out from our firm alone and aside from Victoria, know there are others around the country in our dealergroup doing the same. When you also take into account the increasing errors they are making and lack of any confidence who will ultimately own them in the future, lack of reliable technology and a general feeling that CBA and Colonial don’t care about the advisers anymore, which is directly in contrast to how they started off, why would you keep anyone there? Reap what you sow CBA, lack of faith and pain breeds lack of faith and pain.
Well said. Smacks of a quick and easy fix designed to tick boxes with the regulator, but in no way consider the impact of workload on the advisor as well as more paperwork and confusion for the clients, with again another form for them to sign to ensure that they are aware of fees they are being charged. How many layers of checks and re-checks do we need? This whole system of reporting of fees being charged to clients, needs to be re-visited, simplified in a way that is easy for the client, can I repeat this “easy and less confusing for the client”. Why are financial institutions and ASIC not working with advisors and clients for the best result and simple technology providing a solution. Oh I know, we need a bunch of intellectuals not connected to the industry to have another Royal Commission to solve it.
Amen to this. An absolutely ridiculous call by Colonial, god help us if other institutions try to follow suit.
They have, Suncorp have written direct to clients and asked them to confirm whether or not they wish to continue the payment of fees to their advisers and given them 30 days to respond before they will automatically cease the payments.
Yes this is another stupid additional layer of RED TAPE BS Regulation.
ASIC have basically told all Super Funds to do this and we have already had Australian Ethical ask for proof of Opt in too but at least they were happy with our Optin forms – not another stupid new form.
I think most / All Super Admin platforms (except Industry Super) will do the same thing.
CFS CBA covering their Butt – look at the disclosure in the sign off it is really about them saying they will not be responsible for any Fees for No Service !!!!
ASIC – just like the 55 different formss of reporting CPD, lets have 55 different forms of Fee Reporting / Disclosure.
Engagement letters, SoA, RoA’s, 4 x Statement pa with Adviser Fees on front page, Annual FDS, Bi-annual Optin, so lets add some bloody more. WTF !!!!!!!!!
Unless you’re a union industry fund and can overcharge provide no advice or service, squander and misuse member’s money and make sure you get kickbacks every step of the way but somehow will never come under ASIC scrutiny. Maybe that’s the solution; we all just form one big ‘non-union industry fund’ and get paid what we want as long as we promise to mis-allocate member’s funds into high risk mislabelled investments? Even that red rag Choice won’t be able to find fault with that!
I think you can blame ASIC on this too. They have created this mess of red tape. I wouldn’t use Colonial due to their rules either, and you can be sure they wont support advisers. Didn’t they withhold Adviser access to those that left CBA, because they wanted to retain FUM too? Then dobbed them in, when the Adviser rolled their clients out of the their funds.
The danger now is that all the other institutions will follow suit and defend this by saying everyone else is doing it !
We own a small AFSL in a small country town, we respect “country law”. We were very concerned when we received an email from CFS. No one called us to explain and when we rang to get clarification all was blamed on an ASIC requirement on the Trustee. I agree, this belittles us again in front of our client. Another form needed, up and above the the current process – SOA, Application, FDS and Opt-in. How much more is needed? Enough is enough. We have more important needs to our clients than another level of fee justification. I’m employed by my clients to advice and service their needs. CFS needs to go and have a think how they treat our relationships into the future, as this has put a big chip in it.
These paragons of virtue at the CBA have demonstrated for years that they are incapable of running a wealth management business. They destroyed Comminsure costing shareholders billions of dollars and nobody took the fall. They destroyed Count Financial costing shareholders hundreds of millions and nobody took the fall. In fact most got substantial bonuses. They destroyed numerous other similar business and all the while they have posed as “experts in the field” when they were and are anything but. They are now trying to portray themselves as an organisation steeped in ethics and leaders in ethical behaviour. What a joke!
I run a fairly substantial group and I can assure you that no adviser working for us will do business with them again and I cannot see how professional advisers would even consider using them in the future.
I must admit as a professional adviser I have not used them in about 8 years as the writing was on the wall back then. I still have a handful of clients that are still there because of BID.
And what do you expect from a mob that will burn everyone below management level and cough up a few dollars to keep the name clean. This practice has been always been the norm especially where it is clear that the issues are deeply entrenched by management so that their little bonuses etc are kept in tact. Furgo will be writing war and peace on this if she gets the full picture with all the evidence.
Agree with you Dave except that “little bonuses” should read “big bonuses”.
Surely the answer is to simply not use their products…plenty of other platform providers don’t have these onerous requirements. I believe this where we will see products and platforms thrive or die. Those that can add practice efficiency, lower the cost to serve and allow planners to keep a lid on fees will enhance BID and these innovative platforms will thrive. I think the CFS’s of the world are on a downhill slide given the size of their legacy positions.
You had me until you got into the ‘virtue signalling’….. This would have to be the most over-used phrase of the last few years. If you said CBA & CFS were into ‘butt covering’ I’d be with you 100%!
Virtue signalling is certainly an over used practice. But not an over used phrase. There is still way too much virtue signalling that has not been called out as such yet.
CBA is so out of line with this decision. This has now added 100’s of additional hours worth of work to our firm and it will be required by them each year.
We will now use those hours to raise moving all of our funds with CFS to alternative platforms.
We are voting with our feet and can only expect other advisers will do the same.
Hear hear! It’s simply duplication of existing red tape – with zero benefit to the client.
Agreed. A complete waste of my clients time and mine. They already sign optins every year, they get FDS, they get ROA’s and SOA’s, they are engaged. Why are they being punished for CBA’s misdemeanours?