‘Inefficient and frustrating’: FAAA backs advice fee consent improvements

In a statement on Friday, Financial Advice Association Australia (FAAA) chief executive Sarah Abood said the association “remains focused” on getting a standardised advice fee consent form over the line.

Last week, ifa reported that the Association of Superannuation Funds of Australia (ASFA) has raised concerns about the specifics of a standardised fee consent form receiving “broad consensus”, which Treasury had previously explained was required for any form to receive ministerial approval.

“From the outset, ASFA wishes to state as clearly as we can that our members do not believe the two necessary preconditions outlined by Treasury above have been met,” ASFA said in a submission to the consultation on the forms.

“That is – we do not believe there is broad consensus for the approval of such a form, neither do we believe it is clear efficiency benefits will be achieved.”

While ASFA was extremely clear that it “does not support the issuing of a standardised form at this time”, Abood said that the current state of affairs with each product provider having its own requirements “has made it a very inefficient and frustrating process for both advice businesses and consumers”.

“We, along with other members of the Joint Associations Working Group (JAWG), have provided feedback to Treasury to assist in the design of a standard mandatory form on which all product providers, including superannuation funds, will be entitled to rely,” she said.

“Standardisation of advice fee consent has been universally supported by our members and the licensees and businesses that support them.”

Reiterating a point that the FAAA has been pushing for months, Abood added that the ultimate goal is that fee consents can take place through a “fully digital solution that enables clients to authorise the payment of advice fees through an application on their phone”.

“We remain keen to work with all key stakeholders to achieve an outcome that is in the best interests of consumers,” she said.

“Moving to a consistent process will require an upfront investment by product providers. However, over time we expect this will deliver efficiencies for product providers as well.”

Why is a standard form so controversial?

In a letter to stakeholders in October, Treasury sought consultation on the design of consent forms for ongoing advice fees.

Under the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024, which was passed in July and represented the first tranche of advice reforms on the back of the Quality of Advice Review (QAR), there are a number of changes to consent forms.

Schedule 1, Part 2 of the act removes the requirement to provide a fee disclosure statement, introduces flexibility in anniversary date timing for OFAs, amends the mandatory content for ongoing fee consents and replaces ASIC's ability to prescribe this content with ministerial ability.

Broadly, as Treasury explained in its letter, this means that the minister has the power to approve a form for “giving consent to enter into or renew an ongoing fee arrangement or authorise the deduction of ongoing fees”.

However, the department stressed that, in order for the government to approve a form, there needs to be a “broad consensus from stakeholders” and it must be “clear that efficiency benefits will be achieved”.

“It is not our intention to finalise the design of a form prior to the new arrangements commencing on 10 January 2025 as we are aware that this may require system changes for some stakeholders. Transitional arrangements and appropriate timing for implementation will form part of the design considerations,” Treasury added.

“Once we have reviewed the initial information, Treasury will provide further details regarding next steps in the design process. This is likely to occur in early 2025.”

There is no need for industry consensus in the legislation, with the relevant section 962Y of the Corporations Act merely stating that the minister may approve one or more forms for giving consent in relation to one or more of the following:

1. entering into an ongoing fee arrangement;
2. renewing an ongoing fee arrangement;
3. deducting an amount in respect of ongoing fees from an account;
4. arranging to deduct an amount in respect of ongoing fees from an account.

It also says that if the minister has approved a form, consent must be given in the approved form.

However, ASFA has used Treasury’s “stated necessary preconditions” for industry consensus and proof of efficiency gains to push for standardised forms to be scrapped altogether.

“For any form to be effective in this space, it would have to have the unanimous support not only of the superannuation sector, but of the professional financial advice sector. Such consensus does not exist presently,” ASFA said.

The submission also argued that, given the “multiplicity of obligations” already placed upon financial advisers, additional mandatory requirements would actually impede efficiency. In a similar vein, ASFA said supplementing the “already exhaustive and clear” requirements in the legislation would “just be a repetition of existing requirements which are already in legislation” at best.

“The multitude of variables that need to be addressed may make it challenging for a single prescribed form mandated by the government to cover these variables,” it said.

“For example, product providers will have a different subset of possible fees that trustees will allow, a variety of fee caps that will apply and potentially different opinions around the ability [and consent required] to transfer fees to a new adviser/AFSL if the existing adviser moves.”

In addition to privacy concerns where fees are to be deducted from more than one product provider, the submission also said there are “considerations” in relation to how a standardised form might address “more complex situations where advice is being provided to a couple rather than an individual”.

What needs to be in a standardised form?

While ASFA has opposed the imposition of a standardised form, its submission did also contain recommendations on the construction of the form, which it said came from “extensive consultation with our members, and experts in the field of advice”.

Broadly, if a form were to be issued, ASFA said Treasury should consider a number of issues and requirements:

1. The four legislative requirements under s 99FA of the Superannuation Industry Supervision Act 1992 on the name and contact details of the member
2. An explicit member consent
3. Adviser/licensee details
4. Potential adviser attestation
5. Superannuation fund details and acknowledgement
6. The relevant risk management controls for licensees
7. ASIC’s Report 781: Review of Superannuation Trustee Practices – Protecting Members from Harmful Advice Charges.

The Law Council of Australia also provided suggestions on the make-up of a standardised form in a submission to the consultation, indicating its preference for a single form to cover multiple client and adviser consents/authorisations/attestations.

Included in the Law Council’s version of a single form is:

• the client’s consent to enter into, or renew (as relevant), an ongoing fee arrangement;
• the client’s authority and direction to deduct fees from a financial product (irrespective of whether the product is a superannuation or non-superannuation product); and
• a brief declaration by the adviser about the nature and scope of the advice services which have been, or are to be provided, to the client.
• This final point, it said, would help super fund trustees to comply with sections 62(1) and 99FA of the SIS Act.

The Law Council added that it is important that the form is in “user friendly language”, including that the form not mandate the use of new terminology that “may be unfamiliar or confusing to clients”.

In line with Treasury’s timeline, the Law Council agreed that there would need to be a transition period to implement any standardised form “to allow licensees sufficient time to implement the approved form and benefit from the intended efficiencies of the uniform approach”.