ASIC released guidance on Friday for advice firms wishing to subscribe to an approved code of conduct, but most practices questioned by Wealth Professional say they are more concerned with the statements they have to issue to clients.
ASIC’s codes will obviate the need for opt-in, by enforcing rules that set out a model of conduct and disclosure for industry members that are signed up. Many advisers will be taking up this offer, rather than the opt-in requirement to renew their clients’ agreement to pay on-going advice fees at least every two years.
The issue raised by advisers, when asked about the codes of conduct, was that issuing statements to clients was a costly measure that was also unnecessary.
One adviser described the statements as: “Another cost to the consumer for no real result, as the statements that they already receive have all this stuff itemised now.
“We are just repeating this for them at their cost for which there has been no apparent consumer demand as far as I am aware.”
If the statements cannot be avoided by any code of conduct, it will lead to the clients who are low-touch seeking to cancel the relationship and eliminate the fee, said a GPL adviser.
Members of the FPA can subscribe to a code that CEO Mark Rantall says will “remove the draconian two year termination requirement”.
“Instead, it replaces it with a consideration of the suitability of the on-going services to the client, judged at the initial engagement and again at a pre-agreed renewal point. Without this, we believe that clients could find themselves without financial support at a time of great need,” said Rantall.
The AFA also welcomed the guidance and warned that there was still much to be considered with respect to the opt-in exemption, recommending that the industry take the time to consider this carefully.
“Given that the opt-in obligation is still more than two years away from applying to clients, this clarity means that advisers and licensees can focus their attention on the far more pressing issues of compliance with Fee Disclosure Statements and conflicted remuneration, enabling them to take the time to consider fully how they wish to be bound by a Code of Conduct and through which professional association,” said AFA CEO Brad Fox.
Are you prepared to hand out Fee Disclosure Statements, or do you think they are unnecessary?