Fixed-term fees not a way to evade ongoing fee consent

Bryan Ashenden BT Array Array fees

29 July 2021
| By Chris Dastoor |
image
image
expand image

Advisers should be wary of using fixed-term arrangements to avoid ongoing fee consent renewals, as the former will likely end up creating the same amount of work, if not breaching the code of ethics.

Bryan Ashenden, BT head of financial literacy and advocacy, said some advisers talked about the requirements being less under a fixed-term arrangement than they were under the new ongoing fee arrangements.

“Technically, that’s correct but I’d also ask the question whether they are actually saving anything,” Ashenden said.

“If you have a fixed-term arrangement in place and you want to renew it when you start that process about entering another fixed-term agreement… it sounds like you’re going through the same process that you would under the new ongoing fee arrangements and annual consent requirements anyway.

Ashenden said a fixed-term arrangement was typically one that did not go beyond 12 months but could go longer.

“That could be up to in theory 365 days or a period of up to 12 months, just as long as it doesn’t exceed it,” Ashenden said.

“What’s important to remember here is under definition of the law, you can’t have a fixed-term arrangement that goes for two years that gets you out of annual consent or in any way around these requirements.

“A fixed-term contract for two years is technically a fixed-term contract, because it has a start date and end date. But in terms of annual consent requirements, as soon as it goes for more than 12 months, it will [be counted] as an ongoing fee arrangement and the annual consent requirements come into play.

“There will be questions for you as an adviser whether you want arrangements to be an ongoing basis or whether you prefer the fixed-term approach, you may even have a hybrid.”

Ashenden said this came back to Standard 1 of the Financial Adviser Standards and Ethics Authority (FASEA) code of ethics.

Standard 1 states: “You must act in accordance with all applicable laws, including this code, and not try to avoid or circumvent their intent”.

“What was the intent of the law and are we taking steps to try to get around that intent,” Ashenden said.

“Because just changing your arrangement [means] you have to ask the question: am I breaching the code in that regard?”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 2 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

4 days 19 hours ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

3 weeks 4 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

4 weeks ago