Annual opt-in confirmed, but more flexibility

It was a busy day for the Federal Government, announcing the proposal to disband FASEA, introduce lack of independence disclosure requirements and then finally, introduce a new fee disclosure regime.

Advisers had been hit with an increasingly complicated set of rules when it came to receiving fee payments from ongoing clients. A combination of grandfathering, for those who became clients before 1 July 2013, opt-ins, renewal agreements and Fee Disclosure Statements (FDS) meant many advisery firms asked small clients to leave due to administration burden.

The Coalition appears to have delivered on their two core strategies, being to ease the regulatory burden whilst putting in place the key recommendations from the Hayne Royal Commission. On Wednesday, it was announced that the requirement to send an FDS and Ongoing Service Agreement, or Renewal Notice every two years will be simplified.

Under the proposal, the information required to be disclosed can from 1 July 2021, be included in a single document. This document will cover an estimate of the fees for the coming year along with a summary of the previous years’ fees.

In return for the simpler disclosure, however, financial advisers will be required to provide this new letter every year, rather than every two years as in the past and grandfathering pre 1 July 2013 clients will be removed. Advisers will have 60 days from the renewal ‘anniversary’ to provide the document, but a separate 120 day ‘renewal period’ will begin on the anniversary date.

According to reports, if the client has not signed the agreement within a further 30 days, being a total of 150 or five months, after the anniversary, they will be deemed to have ‘opted out’ and fees will need to be turned off.