Australians receiving financial advice could be at risk of receiving incorrect information about advice fees or continuing to be charged fees even after ongoing fee arrangements have been terminated, an Australian Securities and Investments Commission (ASIC) report has found.
“Report 636 Compliance with the fee disclosure statement and renewal notice obligations” detailed ASIC’s compliance assessments of the fee disclosure statements (FDS) and renewal notices (RN) issued by 30 randomly sampled Australian financial services (AFS) licensees and their representatives.
The report found of the 176 FDSs reviewed in detail, 80 per cent did not include the full required information about services clients were entitled to receive.
In addition, the corporate regulator determined 73 per cent of the FDSs reviewed did not cover all the information about services clients received and 44 per cent did not include the amount of each fee paid by clients.
While examining the 1496 FDSs and 373 RNs collected for the report, ASIC found 7 per cent of the FDSs were not provided despite being required to be provided by law and an RN was not provided in 35 per cent of the instances when a similar obligation existed.
The report also revealed half of the licensees scrutinised did not have an effective process in place to remind them when RNs were due or when they should discontinue ongoing fees.
“Our review has found widespread non-compliance with fee disclosure obligations across the sample of AFS licensees and their representatives, suggesting that compliance with the FDS and RN obligations may be an industry-wide problem,” ASIC commissioner Danielle Press said.
“Consumers are at risk of receiving inaccurate fee disclosure statements or, in some cases, none at all. This is a timely reminder that while disclosure alone is not enough as a consumer protection mechanism, transparent and timely disclosure still has an important role to play.
“The 30 licensees in our review have been advised of our concerns and we are strongly urging all AFS licensees to immediately take steps to improve the robustness of their compliance measures.”
Earlier this month, ASIC announced it would not penalise advice licensees for failing to sign their representatives to a compliance scheme following the federal government’s decision to keep ethics enforcement in-house.