The Government needs to significantly amend arrangements around the fee disclosure requirements contained in Future of Financial Advice (FOFA) legislation to eliminate anticipated fees, and financial planners should be given more than 30 days to provide such fee disclosure statements.
That is the bottom line of the Self Managed Super Fund Professionals Association (SPAA) submission to the Parliamentary Joint Committee reviewing the FOFA bills.
At the same time the SPAA submission has warned that the nature of the opt-in arrangements will cause confusion because the existing legislative proposals do not make it clear whether a financial planner’s obligations to provide service terminates at the same time as the fee arrangement.
"If the services provided along with the legal obligation of the fee recipient does cease at this time, the client may not always be aware that the arrangement has in fact been terminated."
The SPAA submission also suggests that the nature of the proposed legislative provisions has the effect of actually reducing the two-year opt in.
It points out that even if a client receives a renewal notice well before the second anniversary of the day on which the arrangement is entered into, the client must still respond to the fee recipient within 60 days of receiving the notice or risk the arrangement being terminated.
"Therefore, issuing the renewal notice early will have the effect of reducing the two-year opt-in period for both the client and the fee recipient," the submission said.
It said the legislative provision appeared counter-intuitive in that it discouraged and arguably penalised a fee-recipient who chose to plan ahead and provide the client with more time to consider and respond.
