Advisers could be caught out by annual fee disclosure statement (FDS) requirements, with many unclear on what their obligations are and potentially hefty fines resulting for non-compliance.
Although the regulator has outlined a “no action” position, allowing businesses some grace for existing client contracts, this will not apply to new clients who join a business from 1 July this year.
Adam McGuren, national manager Licensee Select at BT Financial Group, said he has spoken to several self-licensed groups who are confused over exactly what will be required under the FDS changes.
Essentially, all advisers charging any form of ongoing fee need to clearly outline exactly what services they provided and how those are charged.
Confusion can arise over, for example, the start date of the nominated service period given the initial consultation and final authority to proceed could be quite different. Guidance is clear though that the 12 month period can end no longer than 30 days before the FDS is provided.
There is also confusion over exactly what needs to be disclosed in cases where, for example, a client has an ongoing service proposition linked to a risk insurance commission but pays a fee for service on investment advice.
“Both forms of revenue need to be included in the FDS,” Mr McGuren said.
He said Licensee Select provides licensee support services to around 70 non-aligned financial planning businesses, in addition to 440 Securitor advisers in around 230 businesses.
“I’m worried that I’m speaking to businesses outside our network that won’t be ready,” he said. “There is still a lot of confusion – many don’t know what’s going to happen and might not be compliant. There’s a lot of change that needs to happen.”
He said the requirement for advisers to outline exactly what services they provide and what fee is paid could also serve as an opportunity for advisers to revisit exactly what their client proposition is, reaffirm that value and serve as a platform for growth.
