The Association of Financial Advisers (AFA) and Financial Planning Association (FPA) welcomed the release of the Australian Securities and Investments Commission’s (ASIC’s) Regulatory Guide 245: fee disclosure statements (RG245), with particular applause for the ‘no action’ clause.
“The ‘no action’ positions are appreciated, particularly the one related to setting the disclosure date for existing clients where it is difficult to determine the exact commencement date,” AFA chief executive Brad Fox told InvestorDaily.
He said the association is pleased to see ASIC responding to industry requests for guidance on fee disclosure statements and that it also appreciates the consultative approach the regulator has taken to develop the regulatory guide (RG).
“The RG has provided a lot of clarity that the industry was seeking. The industry has a significant amount of work to get ready for the production of fee disclosure statements, so the release of this document is a very positive step,” Mr Fox said.
FPA chief executive Mark Rantall also welcomed the guide, describing it as a ‘common sense’ approach.
“On the positive, the FPA is pleased with ASIC’s approach to introduce so-called ‘no action’ clauses in the regulatory guide as a pragmatic approach to resolving non-compliance, where financial planners are unable to meet their obligations through no fault of their own,” he said.
However, the FPA also said it remains concerned by the introduction of a fee disclosure statement for existing fee paying clients.
“This obligation is cumbersome and creates costly duplication, and we would argue for further discussion and a quick resolution to the downside consequences of this approach in its current form,” Mr Rantall said.
RG245 outlines the requirements that will apply to Australian financial services (AFS) licensees and their representatives who receive ongoing fees from retail clients they have given advice to.
Under the Future of Financial Advice (FOFA) reforms, advice providers fees for giving personal advice under an ongoing arrangement with a retail client must provide the client with an annual fee disclosure statement (FDS), setting out information about fees paid by the client, services provided and the services the client was entitled to receive.
The obligation is designed to help clients determine whether the ongoing fees they are paying are proportionate to the services they have received, or they were entitled to receive.
This regulatory guide explains the FDS obligations and when they apply, who must give an FDS, the circumstances giving rise to the obligation to give an FDS, and the information that must be disclosed in the FDS.
The regulatory guide also sets out three limited ‘no action’ positions that ASIC is taking to assist the industry make a smooth transition to meeting the FDS obligations within the FOFA regime.
“This guidance provides an indication of what ASIC’s approach will be in administering these important provisions, which are designed to provide clients with an opportunity to assess whether they are getting value for money for the advice they receive,” ASIC commissioner Peter Kell said.
“Following consultation, ASIC has released this regulatory guide to address practical difficulties for industry participants in complying with the fee disclosure statement obligations, without undermining the consumer protection goals of the provisions,” he said.
ASIC will take a facilitative approach for the first 12 months of the FOFA reforms, until 1 July 2014.
The regulator said it expects industry participants to make a reasonable effort to comply with the new regime, and will take a measured approach where inadvertent breaches arise, or system changes are underway.
“However, where we find deliberate and systemic breaches we will take stronger regulatory action,” Mr Kell said.
