Clients to foot $28m annual renewals bill

The finalised legislation, which was introduced to Parliament on one of the last sitting days of the year, contains a number of concessions following industry consultation, including the merger of fee disclosure statements with annual renewal of ongoing fee arrangements and relaxed requirements around the dates that advisers must seek client consent.

However, the cost impacts listed in the explanatory memorandum of the bill estimate the compliance costs for ongoing fee arrangements alone to be more than $28 million.

“This includes $11.7 million of upfront costs in the year of commencement, followed by an annual compliance cost of between $21.2 million and $33.7 million in subsequent years,” the bill states.

Roxburgh Securities adviser Steve Blizard said, “The EM does not justify the basis for imposing these additional costs on consumers.

“You would think the consumer activists would be outraged by the government increasing costs like this.

“The real solution is to ensure informed consent is provided in any SOA or ROA for any ongoing fees, and to renew that consent when an updated SOA or ROA is produced.”

Lifespan Financial Planning chief executive Eugene Ardino said while concessions such as merging the number of documents needed to be completed by advisers were “very positive”, the bill in its current form would ensure the cost of advice continued to increase.

“There’s bits of it that are good, but it’s still having to do the annual opt-in that is going to raise the cost of advice,” Mr Ardino said. 

“The fact they’ve made it more efficient is good, but there’s no doubt that that requirement is going to raise the cost and reduce accessibility.”

As the government’s legislative response to the royal commission switched back into gear after months of COVID-related delays, Mr Ardino said the industry needed to be realistic about the levels of regulatory relief they were likely to get in the months ahead.

“The government might look at ways to pare that back a bit, but we have to accept that they do want more and more compliance and they are just prioritising that ahead of accessibility,” he said.

“That’s life and advisers have to accept that, and reposition their business to be able to cope with it.”