Sean Graham is a lawyer and compliance expert who provides advice to planners coping with regulatory complexity and frequent change. He tackles the elephant in the room – Fee Disclosure Statements:
When Voltaire was on his deathbed he was advised by his priest to renounce the Devil and his works. “Monsiegneur” he replied “now is not the time to be making new enemies”. It’s particularly good advice for anyone discussing financial services reforms.
Consider Fee Disclosure Statements. In principle, most people would struggle to understand why a consumer shouldn’t be told what services they paid for and what services they actually received. But, for some reason, many financial advisers seem fundamentally opposed to the level of transparency the FDS represents.
If you monitor the industry discussions on social media you’ll identify a simmering tension. Recently, one adviser argued that the FDS should not be limited to showing the ongoing fees the client is paying, but should, in the client’s best interests, also show the commission (and other benefits) that the adviser receives in relation to that client.
Although the subsequent debate was expectedly anaemic, in my own discussions with advisers and licensees, I have been surprised by some of the angry reactions to the suggestion. I’ve been told it’s unnecessary (“The SoA told them”), irrelevant (“clients don’t need to know”) and inconvenient (“the platform doesn’t record it”).
But few of these objections deal with the substance of the matter – shouldn’t your client understand what you’re receiving for providing them with advice and services? If they aren’t told, how can a consumer possibly make an assessment of the value of the services provided to them? If you don’t do this, how will you compete with advisers that do?