IOOF is planning for the advisers within its sprawling network to move from current OSA arrangements to 12-month contracts for advice.
The group, which has about 1800 advisers after folding almost 1000 into its network from ANZ earlier this year, has revealed it is now two thirds of the way through a roadshow with advisers to discuss how the change will be implemented.
Annual contract arrangements will be implemented for all new clients from January 1, 2020. Existing clients will roll over into the new arrangements as their reviews are conducted throughout next year.
According to Darren Whereat, IOOF’s general manager of advice, the move is about letting clients know that services promised are being delivered. “It just makes it really clear for clients what they expect from an advice relationship,” he says.
Whereat says IOOF has been working closely with the advisory committees for all the advice brands in its group, including Lonsdale Financial Group, RI Advice, Financial Service Partners, Millennium3.
“The overwhelming response has been positive,” Whereat reveals. “There has been an overall acceptance of the fact this is the direction things are heading.”
Following AMP’s announcement last week that it will cull the roughly 2400 of advisers in its network, IOOF could soon become the largest licensee in Australia.
Pressure from above
Commissioner Kenneth Hayne took exemption to ongoing service agreements in his royal commission final report, saying the two-year contracts give advisers a “financial advantage” over their clients and were partly to blame for the fee-for-no-service scandals.
“The central changes I would make are to require that ongoing fee arrangements must be renewed annually and that the client be told what will be done,” Hayne stated in the February report.
After both major political party’s pledged to implement Hayne’s recommendations, ASIC and APRA sent a combined missive to licensees saying they wanted all trustees to review “governance and assurance arrangements for fees charged… and to address any identified areas for improvement in a timely manner” by 30 June, 2012.
While OSAs are still allowed under the Corporations Act (2001), Whereat believes legislative change will follow the expectations of the community. “It’s clear this is the way the advice industry needs to head,” he says.
“Following on from the royal commission and the joint APRA and ASIC letter, along with the trustee obligations relating to sole purpose test and the large-scale remediation programs… no one wants to go through that again,” Whereat continues.
He notes that while the response from their aligned advice groups had been positive, many were keen to find out more about how the change will come about. “There’s a strong appetite now for details in terms of how this plan will be implemented, particularly relating to the supporting tools and templates,” he says.
Whereat adds that IOOF is looking to digitise the process as much as possible.
“If advisers aren’t able to make the new arrangements with clients face to face then there will be a way,” he says.