The Financial Advice Association has called on the government to mandate a standardised fee consent form or remove product issuers from the process altogether, after the first tranche of draft of legislation failed to deliver certainty over a universally prescribed form.
In its submission to the consultation on the first Quality of Advice Review draft legislation, the association has made two suggestions: option one is to remove the requirement for product issuers to verify each individual client’s consent, while option two would be to proceed with the current approach but amend the primary legislation to mandate all product providers accept a rationalised, standard form.
The requirement to annually seek client consent for fee deductions is a recommendation from the Hayne royal commission and commenced on 1 July 2021. The association has been vocal on the issue, which is recognised as one of the key pain points for advice practices.
QAR lead Michelle Levy recommended a single prescribed consent form, and Jones accepted that recommendation when announcing the first response to the proposals in June.
However, the draft legislation included the loophole that it wouldn’t be legally required for product manufacturers to use a single prescribed form.
Pushed on this by Professional Planner during a media briefing at FAAA Congress, Jones said a form will be prescribed if need be.
“The objective is to have a single form that advisers can use,” he said in Adelaide last month at Congress.
“We’ve consulted on the draft; if we can’t get there by one means we’ll get there by another.”
FAAA chief executive Sarah Abood said option one acknowledges that financial advice has become a profession since the royal commission, and advisers and their licensees have the obligation to obtain clients’ informed consent before receiving any benefits, including fees.
“It is unnecessary as well as hugely costly for product issuers to be required to verify every individual consent form,” Abood said in a media statement on Thursday morning.
“It is already against the law for such fees to be charged without client consent. If it were found that such fees had been charged without consent, then the adviser and their licensee would be obliged to refund them, as well as being subject to a range of penalties.”
But failing that, the FAAA urged the government to at least fulfill the commitment to have a universally prescribed form.
“[Option two] would be more complex, as the standard form would need to take account of client units (husband, wife, trust, company etc) and multiple product holdings,” Abood said.
“However, we would still realise some efficiencies by removing a substantial level of variability for advisers and their clients.”
Happy anniversary
Regardless of which option is followed, Abood said the anniversary date for consent also needs to be addressed.
“The inability to change the anniversary date and thus move the date of annual reviews is a huge issue, impacting advice practice efficiency and the ability to be fully client centric,” she said.
“To realise efficiencies in this process, it is critically important that advisers have the ability to bring forward renewal dates to harmonise reviews for different entities and clients in the one group and to align with the preferred timing for clients.
“However, this draft legislation would not make it mandatory for product issuers to accept the standard form. And it is unlikely that product issuers will choose to make the expensive changes to their systems and processes that would be required to standardise fee consent, unless they are required to do so by law.”
