In response to a question on notice from Coalition MP and former financial adviser Bert van Manen in the parliamentary joint committee on corporations and financial services, ASIC noted that a client’s refusal to engage in an annual review did not let a licensee off the hook from a potential remediation of ‘fees for no service’.
“Can you please advise what regulatory guidance ASIC has provided in the past with respect to a licensee’s requirements to monitor the provision of agreed services (i.e. ‘fee for no service’) and what should happen when services are not provided, including where a client declines to have an annual review?” Mr van Manen asked.
While laws are currently before Parliament that would see advisers obliged to provide fee renewal documents to clients annually, and to switch fees off if they are not able to gain the client’s consent, the regulator responded that advice relationships entered into before the laws came into effect could still trigger a remediation if the client was not being engaged annually.
“What should happen when a client declines to have an annual review depends on what services the client’s ongoing agreement included,” ASIC said.
If the service agreement included an annual review, clients needed to be refunded for this regardless of whether they had been offered the review and refused it, the regulator added.
“If agreements entitled customers to an annual review, and the customer had declined the annual review in consecutive years, a customer centric approach would involve refunding some fees because consecutive declines may indicate that the ongoing service arrangement is unsuitable for the customer,” ASIC said.
The regulator pointed to its Information Sheet 232 on fee for no service remediation, released in mid-2018, which stated that “in conducting [a] review and remediation program, the licensee must act efficiently, honestly and fairly, and should take a client-focused approach”.
Really annoys me when these ‘paid-for’ public servants who have never had a GDP-increasing real job call our clients “customers”, like someone buying a soup tin in Coles. Taxpayer funded govt clerks have no place making decisions on our industry at such an important phase of development in which we now find ourselves. They are not even intelligent enough to understand they need to get OUT of the way and let industry experts make the decisions – not special interest groups and certainly not pollies themselves whose only interest is in re-election next time.
[quote=Anonymous]What part is the nightmare – having to justify why you are charging your clients an annual fee or having to comply with the law?[/quote]
Here is a heads up. ASIC do not actually know what they are doing.
So you can enrol in a university course and then decide not to complete it, but you still get charged the course fees because you are taking up a spot in the class. How is it different for financial advisors?
We only have a certain number of spaces available for ongoing clients, where if the client had no intention of getting a review, the adviser is out of pocket through the refund of fees and the lost opportunity to fill that position with another fee paying client. ASIC clearly have no idea. If the client is not engaged they wouldn’t opt in for the next year anyway, but the fees should be for the adviser not refunded.
We are on annual Fee for service and we never have problems just more of a pain really… adds more time and another tick box we have to do adds no value to the client and we have to allocate more time to producing the documents which we in turn charge the client for… the client would actually save money if they didn’t have to constantly opt in
Given the choice, most clients prefer to be kept informed through relevant, personalised emails, frequent newsletters delivered in real-time, and of course, annual reports – and depending on the personality of the client, the odd phone call or meeting. Thanks to technology, a modern financial adviser can now deliver all of these important services efficiently and quickly. So if I’ve done a solid job keeping my clients informed and engaged [u]during[/u][u][/u] the course of the year, why should my practice be penalised for providing a high [u]ongoing[/u][u][/u] service standard if a client decides to skip this year’s annual review meeting? This seems utterly backward and counterproductive to me.
Because ASIC only support Industry Super and Intra Fund Advice paid by hidden commissions charged to all members and very few members actually get Advice.
No chance they will get refunded for not using the Advice services they are charged for.
How about a level playing field for Advice and Fees ASIC.
No chance as that’s not going to work for your best buddies Industry Super is it.
Free Enterprise is dead, Welcome to Communism
What if you want a full review once every 5 yeras, but wish to pay for it over 5 years, but include “service support” during that 5 year period? Not unlike a mobile phone contract that even a teenager can afford. Why not have a monthly fee arrangement, that expires after 60 months. (or 36 months). What’s the difference?
Of course none of this relieves me of the responsibility and the liability of seeing the clients portfolio properly managed whether or not they choose to come in for a review. The commerciality of the situation is this. Clients have a responsibility to themselves as well. Where there is an ongoing obligation but the client does not actively engage for a year or so, the fees are payable. We dont find the medical profession handing back medicare payments because the patient failed to take their medicine on a few occasions. It is ridiculous and unsustainable.
Using the same logic, I assume ASIC will be making owners of exercise gym refund the membership fees based on the person joining but never setting foot inside? Despite the fact the gym owner incurs costs like rent, gym equipment rentals, wages to staff and insurances in an effort to provide the client with a quality experience. No wonder non-one is joining this industry!
How do I get a refund for my fees to ASIC? They have provided no direct service or benefit to my situation or business, and if anything, given their conduct and conflicts, they should also be banned!!
Can’t…they went to the ato for a tax bill or something
Go to AFCA, who will ignore you, then give up your AFSL and then become a lifestyle/money coach. It’s a lot easier.
you could have knocked me over with a feather – clients having a mind of their own – deciding what is best for the situation like grown adults. Now that would be like thinking that these concepts can only come from that part of the community that couldn’t spell client – never mind relate to one
Clients often regard access to advice as an insurance policy. They may not want an annual review but they are still happy paying the fee as this provides them with the comfort of knowing they can access advice or support whenever required.
The issue we face with regulator is they have little understanding of the “soft” nature of financial advice.
This is different to legal advice. Unfortunately that mindset is applied to this field to the detriment of the majority of consumers.
Really? How many of your clients, if you asked them, would say “yeah we are happy to keep paying you just in case we need to see you one day”. This would only be OK if you were providing them some other service (besides getting a newsletter).
It is due to advisers treating their clients as cash cows that ASIC is having to take the approach they are.
There are many, many times when a client will say “nah – I’m good, too busy, away on holidays yada yada yada. These laws make no logical sense. Why do you defend them ?
Yes, really.
Every one of our clients receives a fee disclosure statement and an opt-in authority, and at the same time they are asked when they would like to meet to review – 95% prefer to meet at a later date. So in answer to your question, the vast majority of clients are very happy to continue paying our fees whether or not we meet. In the legal world its called a ‘retainer’. Perhaps you need to update your thinking.
There are millions of Industry super fund members paying up to $100 million pa in ongoing “intrafund advice” fees & bonuses, of which only 8% of those members actually receive advice. So it’s OK that millions of people are paying ongoing fees, in case they need advice one day. But NO informed consent forms are signed and NO opt-ins are returned, ever. Spare me the baloney.
What would ASIC know about customer service or a “client-focused approach”? Have any of them run a business?
What a nightmare
What part is the nightmare – having to justify why you are charging your clients an annual fee or having to comply with the law?
Your loaded question ignores the current state of play – advisers are already required to justify their fees to clients, repeatedly. Do you?