Advisers left behind with DBFO fee consent deficiencies: FAAA

Fee consent issues that were meant to be addressed by the Delivering Better Financial Outcomes reforms have only left advisers with further business inefficiencies, the Financial Advice Association Australia has told members.

Tranche 1 of the Delivering Better Financial Outcomes reforms introduced standardised fee consent forms, yet the power to enforce this has not been applied by the government.

“The legislation allowed the minister to mandate the standardised form, but the minister – neither minister – has done that so far,” FAAA policy general manager Phil Anderson told the association’s roadshow in Sydney last week.

But another issue sprang out of the DBFO Tranche 1 legislation, and made it necessary to include an account number in new fee consent arrangements from 10 January 2025.

Last June, ASIC announced it would grant a limited “no-action” enforcement position due to issues with the lack of inclusion of an account number in a client’s written consent for the deduction of ongoing advice fees. 

However, the regulator will only take this no-action position as long as advisers enter into a new ongoing fee arrangement (OFA) with clients and receive an updated written consent, which must cover the period where any fees were deducted under a “non-compliant” written consent. 

Advisers wouldn’t get penalised for the breaches, but reports were still expected to be made under the reportable situations’ regime.

Anderson said there are multiple reasons an account number could change including a client transitioning from the accumulation to pension phase, if there is a product system rationalisation or if super funds were to merge.

“We envisage there will be a range of circumstances in which new account numbers are issued and we have been talking to Treasury about this issue,” Anderson said.

“There’s another problem as well that, with an ongoing fee arrangement, you can change the cycle, you can bring it forward by up to two months or set a new date with the agreement of the client.

“That same flexibility doesn’t apply to fee consent forms, you can’t just change the period for a fee consent form and Treasury acknowledges this and has committed that it will be addressed through regulatory reform hopefully this year.”

But while the profession struggles with the impact of the first tranche of DBFO reforms, the second tranche has been stalled, even with only part of the legislation released before the last federal election.

However, that draft bill was criticised by the FAAA which said there was no material difference with the switch from Statements of Advice to Client Advice Records, as well as raising concerns about the expansion of intrafund advice being anti-competitive.

“The draft legislation put more effort into changing the name of the Statement of Advice to a Client Advice Record than it did on reducing the size of it, but we hope they’ll take that feedback on and make some further changes,” Anderson said.

Tranche 2b contains the more contentious and harder to draft elements including rationalisation of the Bests Interest Duty, repealing the Safe Harbour Steps, and the addition of the new class of adviser which the association calls the new class of provider.

While Mulino told the profession that advice reform was a priority in the months after taking over the portfolio, he changed tune by the end of the year after the second half of 2025 saw mounting public pressure from the $1 billion Shield and First Guardian collapse.

The fallout saw financial advice receive widespread negative mainstream news coverage for the first time in years, making advice reform a more challenging political prospect.

“We understand that, it is a huge issue and it is draining the resources out of both Treasury and those who are responsible for drafting legislation,” Anderson said.

“We do believe it will come, we understand we’re just going to need to be patient.”