The Financial Advice Association of Australia (FAAA) has expressed its concerns over the decision not to implement a standardised fee consent form as part of the government’s first batch of Quality of Advice Review reforms.
Responding to the federal government’s first round of Quality of Advice Review (QAR) reforms contained in draft legislation released last month, FAAA chief executive Sarah Abood noted the absence of a standardised form would not reduce costs in advice so other options had to be considered.
“The removal of the requirement to produce a Fee Disclosure Statement (FDS) is welcome, although advisers with clients on annual agreements are already not needing to produce them. As a result, fee consent standardisation is the key reform in this first batch of stream 1 draft legislation with the potential to achieve meaningful productivity gains. This is a critical step in reducing the cost to provide advice to Australian consumers,” Abood said in the FAAA’s submission to Treasury.
“However, this draft legislation would not make it mandatory for product issuers to accept the standard form. And it is unlikely that product issuers will choose to make the expensive changes to their systems and processes that would be required to standardise fee consent, unless they are required to do so by law.
“Unless the draft legislation is changed, advisers will be left in the current untenable position of needing to annually deliver many hundreds of different forms, in different ways, to every individual product provider they deal with. Clients will remain snowed under with unnecessary paperwork and the cost of advice will not move at all.”
To that end, FAAA recommended removing the requirement for product issuers to verify each individual client consent form, suggesting it was unnecessary and would not achieve the aims of the QAR to make financial advice affordable for more Australians.
“It is already against the law for such fees to be charged without client consent. If it were found that such fees had been charged without consent, then the adviser and their licensee would be obliged to refund them, as well as being subject to a range of penalties,” Abood stated.
“In this option, a standard form would still be developed for financial advisers’ use that they would be entitled to rely upon as evidence of consent.”
In a separate announcement, Abood welcomed the ATO’s move to clarify the rules around the deductibility of financial advice fees with the release of Draft Tax Determination 2023/D4.
“This revised guidance is sensible and welcome. The existing tax determination is almost 30 years old and a substantial amount of regulatory change has occurred since 1995,” she said.
“This draft revised guidance clearly states that upfront fees are deductible to the extent that they relate to tax advice and there is far greater clarity on the deductibility of ongoing fees.”