During FoFA master classes at the GenXt Roadshow, AFA CEO Brad Fox discovered that knowledge is low and concern is high, around the implementation of fee disclosure statements – which is now only four and a half months away.
He said it was a general lack of preparedness that stood out amongst advisers. “They think their dealer group’s going to turn up with a fix-all solution sometime in the next four and a half months and they won’t need to be too concerned about it themselves, but I don’t think that’s an appropriate way to be getting ready for one of the most significant changes in financial advice in 20 years,” he said.
Advisers only providing insurance advice, or receiving their fee from the product supplier as a built-in cost, don’t need to consider the statements. But anyone doing a mixture of insurance and other advice needs to provide their client with the fee they have charged, along with what services they have promised to deliver in the past 12 months, and what services they actually did deliver. If the first time you provided advice for that client is July, then in July this year you have to provide the fee disclosure statement. There is a chance to reset that date after having met it the first time, but at this point, you need to start on the first engagement date you had with the client.
Fox said there were a few things advisers could do to prepare for fee disclosure statements:
Make sure you’re aware of what you are required to do
If you have an inactive client base, get it active and start now
Evaluate whether meeting the minimum requirements of the FDS is going to be best practice for your business, or should you go above and beyond the minimum requirements
An adviser, together with their licensee should consider whether disclosing the min requirement or disclosing all fees and earnings from a client, is most appropriate for their business, said Fox. He recommends putting yourself in your clients’ shoes to decide what the most effective way to communicate with them is, and to build transparency and trust at every opportunity.
“We’ve got the most stringent laws now that there has ever been to provide financial advice and if you meet those laws you’re definitely acting professionally; the laws are that tough. But there’s always going to be the opportunity, in any profession, for people to want to stand out above the pack and this is one of those opportunities…to go a step above and become a leading practice, or a standout profession.”
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