Legislation passed in federal parliament last week has cast doubt over whether the financial adviser or a service provider, such as a platform provider, owns the relationship with an existing client.
The Financial Sector Reform (Hayne Royal Commission Response) Bill, given royal assent last week, means superannuation fund members must consent annually to trustees deducting ongoing adviser fees.
The new requirement does not come into effect until 1 July, but according to WealthO2 managing director Shannon Bernasconi, the law has already impacted the relationship between platform providers, advisers and their clients.
Bernasconi pointed out platform providers have taken it upon themselves, many months prior to the law being introduced, to begin the practice of contacting clients directly about the rule change without informing the relevant adviser, signalling these organisations believe they own the client relationship.
“Understandably, many advisers are unhappy to discover that their platform provider has been in direct contact with their clients, without notifying them first, to advise them of potential changes to their fees,” she said.
“No doubt the platforms believe they have good reasons for taking this step and circumventing the adviser’s relationship with their clients. They may claim that it is a regulatory requirement or perhaps an action to reduce liability. Another reason may be that they lack the technological ability to obtain consent in a more adviser-led or digital way.
“However, it can be argued that the direct contact from platforms – often without the knowledge of the adviser – has caused unnecessary concern for clients and, as a result, for advisers.”
She expressed her surprise at the move platform providers have taken, saying it fails to “take into account the annual review process where the client is consenting to fees already”.
Further, she predicted this development will lead to advisers being more discerning about the platforms they use – a shift that is already underway as a result of the banks’ withdrawal from the wealth management space.