Annual renewal a ‘cornerstone’ of advice reforms, says Whiteley

The Industry Super Network (ISN) has called for the ‘effective’ implementation of the Future of Financial Advice (FOFA) reforms if consumers are to be protected from commissions by another name.

ISN chief executive David Whiteley asserted that the financial advice industry was merely replacing sales commissions with “even more expensive” asset-based fees, adding that effective annual renewal arrangements for ongoing fees were a “cornerstone” of the reforms package.

“The only way in which asset-based fees can be permitted within a future advice regime is with an annual review requirement in the form of an opt-in mechanism,” he said. “Without a requirement to annually renew these arrangements, the FOFA reforms will be seriously compromised.”

Whiteley asserted that ongoing asset-based fees created the potential for consumers to be charged for advice they did not receive.

“The annual renewal mechanism will ensure that ongoing advice fee arrangements are not left in place simply through client inertia. As there are no existing requirements for ongoing disclosure of fees by financial advisers, the annual renewal will also provide a mechanism for financial adviser fee disclosure and transparency,” he stated.

Whiteley said that an annual renewal process would increase consumer engagement and control, adding that should a financial adviser provide ongoing financial advice the annual renewal “did not impose a significant administrative burden”.