The Financial Advice Association Australia (FAAA) is pushing for a mandated standardised fee consent form to minimise red tape and reduce the cost of financial advice.
Sarah Abood, FAAA chief executive, has voiced concern regarding the government’s decision not to mandate a standardised fee consent form for financial advisers.
While the industry body welcomed the removal of the requirement to produce a fee disclosure statement (FDS), Abood argued that advisers with clients on annual agreements are already not needing to produce them.
“As a result, fee consent standardisation is the key reform in this first batch of “Stream 1” draft legislation with the potential to achieve meaningful productivity gains. This is a critical step in reducing the cost to provide advice to Australian consumers,” Abood said.
She, however, noted that, according to the draft legislation, it would not be mandatory for product issuers to accept the standard form.
“It is unlikely that product issuers will choose to make the expensive changes to their systems and processes that would be required to standardise fee consent, unless they are required to do so by law,” the CEO explained.
“Unless the draft legislation is changed, advisers will be left in the current untenable position of needing to annually deliver many hundreds of different forms, in different ways, to every
individual product provider they deal with”.
Ultimately, Abood argued, clients will remain “snowed under with unnecessary paperwork and the cost of advice will not move at all”.
As such, in order to ensure real progress, the FAAA offered two options to change the draft legislation and achieve the goals of the first stream.
Option one is the removal of the requirement for product issuers to verify each individual client consent. According to the FAAA, this is the simplest approach and its preferred option.
“It is based on an acknowledgement that since the Hayne royal commission, financial advice has become a profession, and advisers and their licensees have the positive obligation to obtain clients’ free, prior and informed consent to any benefits received, including fees.
“It is unnecessary as well as hugely costly for product issuers to be required to verify every individual consent form. It is already against the law for such fees to be charged without client consent. If it were found that such fees had been charged without consent, then the adviser and their licensee would be obliged to refund them as well as being subject to a range of penalties.”
The second option provided by the FAAA is to continue with the current approach of advisers providing fee consent forms to product issuers, but amend the primary legislation to include a mandate for all product providers to accept a rationalised standard form for the deduction of personal advice fees, as evidence of client consent.
“This would be more complex, as the standard form would need to take account of client units (husband, wife, trust, company etc) and multiple product holdings. However, we would still realise some efficiencies by removing a substantial level of variability for advisers and their clients,” Abood said.
Regardless of which of these options is followed, however, Abood flagged that another issue which “must be addressed” is the approach to the anniversary date for fee consent.
“The inability to change the anniversary date and thus move the date of annual reviews is a huge issue, impacting advice practice efficiency and the ability to be fully client centric”.
Overall, Abood said, these changes would deliver significant improvements for both advisers and their clients.
They also align with the government’s acknowledgement of the professionalisation of financial advice, she concluded.
Yes we are a profession and it should be up to us and the client on how fees are charged and arranged within the code and regulations, annual consent forms aren’t needed and would be a huge step forward – I’d rather this change above all else!
The whole Fee Consent concept is fundamentally flawed, unfixable and should be scrapped. The FAAA approach is laudable but the odds are against achieving a good outcome – better to move on and just argue against the whole concept. This is all about an agreement between the adviser and the client. If we don’t argue against the Fee Consent regime, we are accepting that this fundamental client/adviser agreement and process should be dictated to us by product providers. Why would we accept that?
Why should this even be a thing? Not rocket science. Jones should have made this No. 1 fix of the “hot mess” after all of the QAR submissions. Jones has zero interest in helping Professional Advisers deliver better outcomes. Just vote them out and move them on.