An advice practice claims current fee consent arrangements have added an extra $30,000 in monthly overhead running the business.

Annual fee consent renewal was introduced in July 2021 after being recommended in the Hayne royal commission in response to concerns raised by Commissioner Kenneth Hayne over fees for no service.

However, the law has since become a major administrative pain point for advice practices.

Apt Wealth head of compliance and licensee operations Rhett Pudney tells Professional Planner the current duplicated annual service agreement and fee consent process have added $30,000 per month to the cost of running the advice firm.

“The proposed legislation does not reduce this cost,” he tells Professional Planner.

Rhett Pudney

Pudney says the firm strongly supports the model of annual client engagement and gaining a client’s agreement to receive services, but the introduction of the fee consent process has been a complete duplication and repetition of the annual engagement process.

“The problem with any fee consent form is that it is not client-friendly in its presentation or content,” Pudney says.

“It must be accompanied by supporting documents including an annual client engagement agreement so that it can be explained to the client while more clearly articulating the services a client will receive and the costs.”

Pudney says due to this duplication and the costs that it creates, the natural outcome is the cost of advice increases for the client.

“This further limits the accessibility of advice which runs counter to the intent of [the Quality of Advice Review] and the legislation which was to allow greater access for all Australians to financial advice,” Pudney says.

Apt is a self-licensed financial planning firm based in Sydney, Melbourne, Geelong and Sydney’s Northern Beaches. It currently has 81 staff and completes around 5500 fee consent forms and associated client agreements a year.

In addition, it employs an extra 15 staff members, through an outsourced arrangement, and their sole function is to complete the annual client engagement process.

“We have also enabled technology solutions, at a significant cost, to assist in obtaining client signatures,” he says. “These types of software charge on a per signature basis.”

Will changes in law help?

Fee consent rules have been criticised for being overly-administrative and adding to the cost of advice, with Quality of Advice Review lead Michelle Levy recommending a single, prescribed fee consent form.

Minister for Financial Services Stephen Jones accepted Levy’s recommendation and after some issues with the wording of the Delivering Better Financial Outcomes draft bill, has tabled legislation to Parliament that will give ministerial consent to mandate a standardised form.

Pudney says a standard form is not an ideal outcome but says it’s better than the current arrangements of providers developing their own fee consent forms.

He believes the proposed legislation needs to be firm in removing non-productive, duplicated and cost-prohibitive processes for financial advisers while being focused on the best outcomes for clients.

“As is usually the case, legislators will draft legislation that attempts to go much further than what it was initially aimed to achieve,” Pudney says.

“They then generally need to remove or amend the legislation. If the fee consent form process duplication is removed the minister may be able to avoid further legislation downstream and to provide better outcomes to clients.”

With the DBFO bill under review by Parliament, uncertainty remains over whether changes to fee consent will pass, so the obligation must remain front of mind for advisers heading into the new financial year.

Financial Advice Association chief executive Sarah Abood says while the minister will be empowered to mandate a fee consent form, this is not an automatic outcome.

“There will inevitably be further consultation on this after the legislation has been passed and we will be pushing for this to happen as soon as possible,” Abood says.

Sarah Abood

“There is still much to be worked out about how this will work in practice. This will require the broader financial services industry to come together and agree on changes that will significantly improve the process.”

As has been the case in the past with fee disclosure statements and fee consent forms, Abood says timelines and deadlines are important.

“That will continue to be the case in the new fee consent regime, so a good understanding of the obligations is critical and having good processes to support this is essential,” Abood says.

Uncertainties remain around product issuers

Abood says much will also depend on the response from product providers and has previously argued that product providers should be removed from the fee consent process altogether.

“Without a standard form being mandated, there’s a risk that many product issuers won’t want to incur the costs of changing their systems to the new standard,” Abood says.

She says the FAAA is hopeful that it can work with the broader industry, including product issuers, to deliver a solution for advisers that meets their needs.

“At this stage, there is not much that the advice population can do, other than wait for the detail to be worked through,” Abood says.

Abood believes FAAA members can play a role in achieving a good outcome by expressing their desire for significant improvements and support for standardisation in their discussions with product provider BDMs.

“Otherwise, it is more about keeping an eye on what is happening and understanding when advisers need to make changes to their processes,” Abood says.