Colonial First State has fired a subtle salvo at advisers with an overt reminder to clients who sign Adviser Service Fee notices that they can end their advice relationship at any time.

In a notice seen by Professional Planner, the wealth arm of the Commonwealth Bank is sending superannuation members who sign ASF notices an acknowledgement that contains relevant information about the fees charged on the account, plus an unprompted invitation to cancel the arrangement.

“You can review these fees with your adviser at any time,” the notice says. “You can also review or remove them at any time by contacting us.”

The move has been poorly received by the advice community, with advisers expressing frustration to this publication that a product provider would arbitrarily reiterate to members how and when they can sever the advice relationship.

Some advisers believe the inclusion of the line is a subtle yet subversive act by the provider, who has made several key moves over the last year to align with their members while distancing themselves from their historical reputation as an adviser-friendly provider.

The move reinforces an industry perception that the provider wishes be seen as a member-focused, rather than an adviser-focused organisation.

CFS has denied this implication, with a spokesperson saying both advisers and members are important to the provider.

“CFS remains a strong advocate for quality financial advice and supports the role that financial advice plays in helping Australians achieve financial well-being,” the spokesperson added.

Early movers

CFS has been very clear in its recent strategy of moving hard and fast to support its member base.

In October CFS became the first major fund to front-run pending legislation requiring advised members to sign AFS forms, with the firm giving advisers 90 days to submit forms signed by clients or fees would be stopped.

This was eight months before the proposed legislation on AFS notices was due to start on June 30, 2020. The legislation will now be delayed until at least August, when parliament sits again after being forced to go on hiatus due to the coronavirus crisis.

The early move from CFS was prompted by a joint letter from the regulators calling the proactive fee authorisation “best practice”.

In December 2019, advisers were sent a list of clients CFS require updated consent for.

CFS was similarly early to start culling grandfathered commissions from its books, facilitating trail rebates available across all products as early as January, 2019. Legislation to end grandfathered commissions by January 1, 2021 wasn’t passed by Federal Parliament until October 14, 2019.

The group then backed up this move in March this year, ceasing to pay grandfathered commissions to licensees for managed investment funds. Additionally, it announced an end to grandfathered commissions on a host of its products from May 1.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at tahn.sharpe@conexusfinancial.com.au
3 comments on “CFS invites clients to sever adviser relationships”
  1. Avatar Nicola Lessing

    I agree with you Jeremy and will certainly be taking steps as you suggest. I was recently reading some research which shows the value a Financial Adviser provides to clients and then we have our best interest duty. On the basis that an adviser provides value and CFS recommends not to have an adviser a case could be made that it may not be in the best interest of the client to go with a product provider that suggests you don’t use an adviser. If you don’t consider advisers provide a benefit then you can’ t be one in the first place as that also would not be in their best interest.

    The point is that these days it is all so convoluted you can argue any point, however in the case of what this article is suggesting about CFS their conduct is just so wrong on all counts. If we see something as unconscionable as that and don’t take action then we are in fact endorsing it and have no right to complain.

  2. Avatar Mike Dixon (CFP®, Dip FP)

    None of us will argue that if we have strong relationships with our clients then this is not really an issue. It’s the action of the provider that is the point of concern and debate/discussion.

    Big issue for some advisers is the increased compliance, red tape etc over the past 2 years that has made it quite challenging for those advisers trying their best to review and improve services. In a lot of cases it has meant a lot of practices have evolved their offering so requires very well planned and delivered meetings with clients and is not a short process. Transitioning a business or clients is not simple and is most certainly not quick especially when the rules are evolving so fast.

    Can’t help however to think there is some level of underlying objective by the provider, maybe just the conspiracy theorist in me. But I can see over time that the basket of clients who no longer have an adviser (mostly due to the provider actively engaging invitations or reminders to clients that they can cease arrangements – not just this year but each year), grows rather massive pool and this will in turn be a new marketing place for the provider to invite them for added services, whether it be financial planning, insurance or banking.

    But of course we know that idea (or others) to be folly as they are purely acting in (our clients) best interest. I’m still not sure if our client or the adviser is actually the product provider’s client? If it is the adviser who is their client, are they acting in their client’s best interest?

  3. Avatar Jeremy Wright

    There is only one way to beat this outrageous behaviour and that is to fight fire with fire.
    CFS is showing contempt for advisers, so all advisers should, after doing their research, find a better suited Manager for their clients and withdraw all Funds under Management, then boycott CFS.

    In 1988, another Fund Manager decided that they had sufficient FUM and told the advisers who had given this Company the FUM, that they were no longer paying advisers what had been agreed upon.

    Less than 6 months later, after the advisers started mass FUM transfers out of that Company, the Company had an epiphany and reversed it’s decision.

    There is a clear message, that was relevant 32 years ago, just as it is today.

    If as an advice body, you allow unfair conditions to be passed, this creates a green light for more to come.

    The Life Insurance Framework ( LIF ) is a clear example of a fractured and adhoc approach to counter what was and still is, a major threat to advisers and all Australians futures.

    Big Business and Government are too far removed from the real world to understand the full implications of their actions, though one thing they do understand, is a line in the sand, that if crossed, will cause them an avalanche of pain.

    There is no discussion with CFS. They crossed that line a long time ago, the reaction was weak and they will continue until they are stopped.

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