Fees a cause for concern

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A major concern among planners is how they will address the new fee disclosure statements they need to produce from July. Claire Wivell Plater from The Fold says that in order to communicate clearly what fees clients will be paying, advisers first need to structure their fees so they can understand them.

“The biggest administration problem for [advisers] will be finding out exactly what fees they’re charging, because the fees are coming from a number of sources. But over time, as they move to non-conflicted remuneration, that’s going to become easier,” she told Wealth Professional TV.

Wivell Plater says that one thing advisers need to think about is how their fees are structured. “If they simply have one fee for all their services it’s going to be a lot easier to report against that. But if they have a number of different fees for different services, they’ll have to report against each one individually, and perhaps a lot of advisers don’t realise that at this point in time.”

She also suggests avoiding a statement of advice (SoA) that acts as a quasi-engagement letter, as it muddles up the purpose of the SoA – to give advice – and isn’t the appropriate place to enter into a contact with the client.

To communicate effectively with clients, Wivell Plater suggests taking focus away from cost and towards value instead. “If you talk about cost, clients always find that difficult and so do most planners. But if you talk about value, what you’re delivering to the client, then I think the client really appreciates what it is that they’re getting – they’re getting piece of mind, they’re having their security that their financial situation will be managed and looked after for them – and they expect to pay when they get value.”

  • GAB on 3/04/2013 3:14:30 PM

    Paul...seriously, should one just sit back and accept more red tape? Look at how much solcitors charge for doing stuff all and getting no outcome. Will we end up like that? Hope not

  • SB on 3/04/2013 3:00:40 PM

    The cost of implementing appears very high and with the FSG, interesting to see if the amount in dollar terms quoted reconciles back to the client that has actually been paid. Maybe near enough is good enough for some advisers.

    I am surprised with some comments and arguments against the fee disclosure. I put it this way. Would you sign an authority for any company/service to deduct an amount as a % of your practice revenue each month automatically deducted then at the end of 12months tell you how much has been deducted. You want to know on a regular basis how much and what for. These days you even get payslips

  • Paul on 3/04/2013 12:04:50 PM

    The accountants, Solicitors do it and have a more labour intensive system than we are required to do so stop looking back and get on with it or risk losing clients. I see this as an opportunity to increase my clients base by advisers ignoring the obvious. The only risk I see is the online limited advice option that will grow over time.

  • MG on 3/04/2013 11:38:09 AM

    One of the main reasons for the "Fee Disclosure Statement" is that it will expose those advisers that have been charging a fee and not providing any service in return. There will be no need to ask clients to "opt in" - they will decide to stay or leave. It also poses problems for those wanting to purchase a book of clients - especially if a large chunk of these clients were not being serviced - and were charged fees. How does one quantify this risk?

  • GAB on 3/04/2013 10:24:30 AM

    But....the fees are already disclosed. One again I cannot see the client benefit here of another disclosure statement. If they can't already read their existing super fund or investment statements that clearly show the adviser remuneration and the original advice document, what benefit will it be to send them another fee statement......and yet, the evil hidden commissions are exempted. It's a con....a big sting by the ISN and Bill Shorten to try and capture more FUM their way. It needs to be rescinded and some decent reforms put in place that are not conflicted.

  • alistair on 3/04/2013 10:04:51 AM

    It is now April 3 2013. With the introduction of this additional piece to clients, the industry seems at a state of flux and confusion surrounding the issue of what goes into this additional piece of paper. So, I ask a simple question as to what does the client need this for given that it is articulated in a statement of advice, the brochure material we hand to clients, an FSG not to mention statements from fund managers as well. The cost of this exercise to be borne by the adviser who I would imagine would pass this on to the client if they wish to remain profitable. Our practice estimates this cost to be in the vicinity of $45K per annum. Why is this needed for the industry.
    It has nothing to do with advice and will not prevent another Storm Financial, Timbercorp, Great Southern, Banksia Capital, Prime Property Trust not to mention the Mortgage Trust fiasco from occurring.
    Just another piece of nonsense created by those in power to justify their existence.
    Here's a practical idea. Instead of driving the cost of business and affordability for advice up. Perhaps these minions in government should pay careful attention to Corporations Law carefully. Very carefully.
    Instead of attacking an industry that stands to benefit Australia from a fiscal viewpoint as its population ages and educates the young from mountains of debt, they should be focusing on corporate thieves that use current laws to rob investors from Billions of dollars as highlighted in a recent Four Corners Episode. But alas, given this government is useless in its approach to this issue, cares not one bit about business, runs this country into debt and deficit and has little understanding of both Macro and Micro Economics and chooses to push a viewpoint akin to Socialism on a grand scale, the people of this country and the good folk in our industry will suffer for a long time to come. Change this government or perish seems to be the answer.

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