Relief Around Ongoing Fee Disclosure Obligations


The Government will create a regulation that will make it easier for advisers to generate Fee Disclosure Statements during the Annual Renewal transition year to 30 June 2022.

Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, says in a statement that the Government is aware that industry may have difficulties generating an accurate fee disclosure statement during the transition period of 1 July 2021 to 30 June 2022 as fees are required to be reported up to the day before the statement is issued.

She says that to address circumstances where advisers are unable to report actual fees in the required time, “…the Government will make a regulation to allow financial advisers to report an estimate of fees for the 60 days prior to the statement being issued. The estimate would be reported alongside the actual fees charged for the remainder of the previous 12 months.”

The AFA has thanked the Minister for coming forward with a solution addressing the issue.

The association says the new proposal is that advisers will be required to provide an FDS that covers a 12-month period, with the first 10 months based upon the actual fees paid and then an estimate for the remaining two months that would cover the period up to the day before it is provided.

…the requirement to add an estimate for the final two months, will add additional complexity and this might make FDSs more manual than usual…

“We appreciate that the requirement to add an estimate for the final two months, will add additional complexity and this might make FDSs more manual than usual during this transition year.”

To help explain this, the association has used an example of an FDS year that covers the period 1 October 2020 to 30 September 2021.

“The adviser would need to use the actual fee data for the first 10 months (1 October 2020 to 31 July 2021) and then add an estimate for the remaining two months (August and September 2021).”

It continues: “Once the FDS data for the first 10 months is available in August 2021, the team would then need to add the estimate for the remaining two months, do all the necessary checks and then provide the FDS to the client on 1 October 2021.”

It says this would lock in 1 October as the anniversary day and mean that FDSs would cover the period 1 October to 30 September in future years. It also notes that advisers should be aware that from 1 July 2021, FDSs need to cover services and fees for the last 12 months and services and fees for the next 12 months.

The Minister has committed to this new regulation being in place by 1 July 2021.

ASIC Guidance

Meanwhile ASIC has released guidance on ongoing fee arrangements

A statement from the commission says it has released an information sheet (INFO 256) on ongoing fee arrangements “to provide greater clarity to financial advisers and advice licensees on their obligations when providing personal advice to retail clients.”

It says this follows recent changes to the law that will take effect on 1 July 2021.

ASIC says that INFO 256 answers frequently asked questions about the obligations that apply to fee recipients in relation to ongoing fee arrangements, fee disclosure statements (FDSs), and ongoing fee consents.

It adds that in developing this guidance, it has taken into account the financial advice industry’s response to recent ASIC consultations, including Consultation Paper 332 Promoting access to affordable advice for consumers.

“Industry has asked for shorter, simpler, and more user-friendly regulatory guidance from ASIC. As a result, INFO 256 will replace Regulatory Guide 245 Fee disclosure statements, which will be withdrawn.”

ASIC has also released consequential amendments to RG 175 Licensing: Financial Product Advisers-Conduct and Disclosure.

“The updated RG 175 reflects new advice obligations introduced into the Corporations Act 2001, following the Financial Services Royal Commission. It includes an example of the lack of independence disclosure statement to help advisers understand the requirements in ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125,” it says.