ASIC Chair James Shipton

ASIC released its advice fee consent and lack of independence disclosure instruments this morning, with several significant changes made to the draft legislation in response to submissions from industry participants that pressed for reduced double handling and less prescriptive measures.

As of July 1 this year advisers must comply with the Advice Fee and Independence Act, which states that “ongoing fee arrangements” (OFAs) must be signed with annual rather than biennial consent, and clients must be provided with a statement as to whether the provider is “independent, impartial or unbiased”, with “reasons why that is so”.

The legislation also places restrictions on superannuation trustees passing ongoing advice fees through member accounts.

Among the broader amendments to the OFA regime, advisers will no longer need to provide a renewal notice as the ‘opt-in’ requirements will be completed in the Fee Disclosure Statement (FDS).

The FDS and written consent forms can be combined into a single document, and advisers are able to seek written consent electronically (via email or a secure webpage).

The new requirements relate to all OFAs entered on or after July 1. Clients must receive their FDS within 60 days of their anniversary date (ie when the OFA was entered into), from which time they have 120 days to sign the agreement in what’s known as the “renewal period”.

The agreement is terminated if the client doesn’t sign within a further 30 days, ASIC added.

Aside from industry associations, notable respondents to the draft legislation include Clearview Wealth, FYG Planners, IRESS, King Fisher Financial Services and Xplore Wealth.

Streamlined consent form

The regulator made several important changes in the legislation from its original form, mostly in response to submissions that pointed out double-handling and uncertainty around disclosure details.

Advisers now won’t need to stipulate in the consent form what services the client will receive, as long as the information is included in the FDS and the consent form is combined with the FDS.

“We have made this amendment to minimise the duplication of the information between a written consent and FDS when these two documents are combined,” ASIC stated in a document outlining its response to the submissions.

The regulator noted that it will soon provide a regulatory guide (RG 245) to further explain what should go into the written consent forms. For now, an example form has been uploaded onto the ASIC website.

ASIC also won’t make advisers include information about the timing of each ongoing fee in the consent forms, or a warning that the clients’ entitlement to benefits may reduce due to the ongoing fee deductions.

The regulator debated whether to be prescriptive with regards to the consent forms, but ultimately went with “the views of the majority” in maintaining a principles-based approach, leaving advisers free to tailor forms within their OFAs as they wished.

“It is always open to fee recipients and/or industry as a whole to develop a standard consent form, provided that it complies with the law,” ASIC added.

Non-prescriptive disclosure rules

Regarding the independence statements, ASIC again maintained that it will not take a more prescriptive approach to what advisers must include in the disclosure.

“Most respondents agreed with our proposal and supported having the flexibility to prepare the written consent differently, depending on the circumstances,” the regulator stated. “They did not support a more prescriptive approach.”

Some respondents did, however, request ASIC provide examples of how advisers working under different business models – “such as vertically integrated businesses or businesses that accept insurance commissions” – would word their statements.

ASIC said it will provide general guidance on the what should be included in the statements, which will be embedded in the Financial Services Guide (FSG), but won’t prescribe specific wording.

“This will include some examples of why providing entities may not be able to use the words ‘independent’, ‘impartial’ or ‘unbiased’ under s923A of the Corporations Act.”

One comment on “ASIC trims double handling with amended fee consent rules”
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    Tom Reddacliff

    The principles based approach may work in some areas but won’t when it comes to the product or trustee consent. It will be a nightmare if they all have different processes. It’s an opportunity for the FSC and the FPA to get together and form a standard process that all trustees and product providers agree to through the FSC. ASIC then signs that off. Layers of complexity and cost ultimately hurt the client. We can’t keep stacking more logs on the fire.

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