Commissions disclosure hits spotlight
The news that ANZ licensee RI Advice plans to voluntarily disclose commissions in its annual fee disclosure statements has put the spotlight on other dealer groups' plans.
From 1 July this year, as part of every annual review, planners will be required to send out a statement to clients listing fees paid and services rendered in the previous 12-month period.
Until recently there has been some confusion in the industry as to whether the fee disclosure statement needs to include the details of commissions paid to the adviser.
According to Minter Ellison partner Richard Batten, the intention of the Future of Financial Advice (FOFA) legislation is that the fee disclosure statement need only include annual fees paid for advice received (ie, 'fees for service') - commission arrangements are excluded from the requirement.
"The language is a little ambiguous, but my view is that it is not intended to include commissions," Batten said.
RI Advice head of practice development Peter Ornsby told Money Management this week that his organisation would be providing total disclosure to clients - including details of commissions paid to advisers.
While RI Advice has made the decision to go above and beyond the requirement of the legislation, it is still uncertain whether the rest of the ANZ-aligned dealer groups will follow suit.
According to a spokesperson for ANZ, "each licensee is working through its plan and [all licensees] are at different stages of preparation".
AMP provided a more definitive answer, with a spokesperson informing Money Management that her organisation would not be voluntarily including details of commissions paid to financial planners from July 1.
Similarly, executive manager of Suncorp licensee Guardian Advice, Simon Harris, said his group would not be including commissions in the annual fee disclosure statement.
"We wouldn't include anything that unnecessarily confuses a client unless the legislation requires us to do so," said Harris.
Details of commission payments would only be included on the statement to clients if they were part of an ongoing hybrid fee, Harris said.
BT Financial Group and MLC both failed to provide responses before Money Management went to print, while the Commonwealth Bank is "working through the details of the requirements", according to a spokesperson.
RI Advice is in the process of putting IRESS's XPLAN technology into place to "streamline" the production of the fee disclosure statements, according to Ornsby.
According to IRESS business development executive Glenn Boyes, many of the licensees he works with are looking to implement XPLAN and the accompanying IRESS solution CommPay to include commission arrangements in their fee disclosure statements.
"The majority [of licensees] are choosing to do full disclosure rather than doing a 'pick and choose' of the fees that they would like to disclose," Boyes said.
Recommended for you
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
Betashares has named the top Australian suburbs with the highest spare cash flow, shining a light on where financial advisers could eye out potential clients.
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
