They say in business, timing is everything. Rob Ferguson explains that when you get the timing completely wrong, that saying really hurts.
For a variety of reasons, we decided to send out a significant batch of our fee disclosure statements (FDSs) on December 19, 2013.
As many would appreciate, the preparation and execution was costly and time-consuming; but we could then approach the office Christmas party with a sense of relief that the back was broken on a tiresome job.
The very next day, the Assistant Treasurer, senator Arthur Sinodinos made the momentous announcement that fee disclosure statements would only apply to new clients. Initial reaction around the office was absolute disbelief at our timing.
However, despite our frustration – and perhaps surprisingly, even to ourselves – we have all agreed to retain fee disclosure statements for our clients, old and new, in the future years.
There were actually some positives to come out of the exercise, albeit with some expensive lessons along the way.
Some of these positives include:
■ The statement provides an additional check of all fees and provides clients with a specific opportunity to discuss value versus price.
■ Conversely, it also gives us a clearer picture of client revenue, both individual and via service levels.
■ The FDS for our premium service clients, which was sent out in bulk, was accompanied by a short portfolio report. Preparation of the report forced an interim check of asset values, performance and personal details at a separate time to the formal annual review.
■ When doing reviews and giving advice, we will not have to waste time endlessly disclosing fees and remuneration when all the client wants is advice.
The cost of implementation of fee disclosure statements has been huge. As a self-licensed group, FB Wealth Management
has access to numerous platforms for our clients. This means we cannot simply access the fee data from a single source.
As a consequence, we initially elected to purchase an expensive and complicated fee module from our software provider. The time and cost involved in running this program – both initially and ongoing – have been enormous and ultimately redundant. We have only 190 clients requiring an FDS. In hindsight, manual calculation using our existing accounting systems would have been more efficient and definitely less expensive. We are currently looking at other potential solutions.
The decision to do a bulk mail-out for one segment of our clients was probably a mistake, as it diverted resources away from work that clients actually value. This was really a reaction to the government’s prescriptiveness. Because of the difficulty in determining anniversary dates for long-term clients, we decided those FDSs would be sent at this same time in future years as well.
Now though, we do not really care if fee disclosure statements are retained in full. The changes to systems are now sunk costs and we will become more efficient each month. What we would like to see is removal of needless specifics.
Life would be simpler for us if we could simply send an FDS once per financial year, without a reference to actual anniversary dates. And how about we decide the format? For example: “Dear Fred, you paid us $10,000 last year.” Or be as long–winded as we like, so long as the fee is disclosed?
Having to segregate the services provided is very time-consuming and is actually insulting to our clients. They generally know what they are paying us for and will certainly speak up if they are unhappy.
So it would be greatly appreciated if government and regulatory bodies showed more respect for our time, allowing us to spend that time with our clients.
