In response to the government’s consultation on the first tranche of draft legislation for its Delivering Better Financial Outcomes package of reforms, the Stockbrokers and Investment Advisers Association (SIAA) has called for changes that streamline the annual fee estimate and consent process.
“Our members support the principle that underpins the requirements – that clients are aware of and consent to the fees that are charged for the services they receive,” the SIAA submission said.
“However, the current regulatory framework has introduced additional cost and complexity for clients; facilitates anti-competitive outcomes; and thus the principle has become obscured.”
The SIAA takes particular issue with the requirement for product issuers to be sent and accept the client fee consent form for the fee to be paid, arguing that it adds unnecessary complexity to the process.
“We welcome any reforms that streamline the requirements for ongoing fee arrangement and fee consents, while ensuring that clients see and agree to the fees they are paying their financial adviser,” the submission said.
“However, the draft bill does not address the issue of complexity and will not reduce the red tape and costs caused by the current legislation and the imposition of bespoke forms and requirements by product issuers.”
According to the SIAA, the way forward lies in the requirement for advice providers to provide the fee consent form to the product issuer.
It also recommended that should the government decide to leave the requirement in place, then the “content and design of a standard fee consent form must be the result of industry consultation that involves all participants in the financial advice ecosystem, including advisers, licensees and product issuers”.
“Product issuers must accept the fee consent form as agreed by industry. In other words, the use of the form is mandatory,” the submission added.
“The content of the fee consent form is to be removed from the draft bill. The fee consent form must be technology-neutral and therefore able to be electronically or digitally utilised and executed.”
Either of these options, the SIAA said, would alleviate the issue of multiple consent forms from product issuers, which it called the “biggest challenge facing our members who have clients holding their investments on platforms”.
“Platform providers require clients to execute/consent using their bespoke consent forms and there is no consistency between platform providers in the format or content of the form,” it added.
“This creates duplication and confusion for clients who are receiving multiple fee consent forms; one from their stockbroker or investment adviser and one or more from their platform provider(s).
“Clients are finding a product issuer interposing themselves between them and the advice firm to be confusing and confronting. From the client perspective, their relationship is with their adviser, not a product issuer. And of course, this complex and over-engineered process is also a very time-consuming exercise for clients.”
The SIAA’s concerns with fee consent forms are broadly in line with the Financial Advice Association Australia’s (FAAA) submission, which also called for a removal of the requirement to provide a product issuer with a fee consent form.
“A standardised fee consent form will only deliver productivity benefits if product issuers are required to accept it,” said FAAA chief executive Sarah Abood.
“As they have already invested in systems and processes to meet this requirement, it is unlikely that product providers will change their approach without a legislative requirement for them to do so.”
According to the FAAA, the way forward is to either remove the requirement for product issuers to verify client consent for every account or require product issuers to accept the standard form as evidence of client consent.
Ms Abood said that the FAAA’s preferred method would be the first of these options.
“We now believe that the only sensible way to move forward is to remove the requirement for the fee consent form to be provided to product providers and allowing them instead to operate a sample-based audit regime,” she said.
