Posted May 1, 2020
Posted By Meghann Cannon
Consultation Paper 329 – what do I do now?
Prepared by Catherine Evans
ASIC has released Consultation Paper 329 in relation to the proposed changes on annual fee consents and independence disclosure in FSGs: https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-329-implementing-the-royal-commission-recommendations-advice-fee-consents-and-independence-disclosure/
The consultation closed on 7 April 2020 and so hopefully in the near future we will have some definitive positions on what annual consents need to look like, or at least some certainty about timing.
The annual consent requirements were intended to apply from:
· 1 July 2020 for all new ongoing fee arrangements entered into from that date;
· 1 January 2021 for ongoing fee arrangements entered into with pre-FOFA clients; and
· 1 July 2021 for everyone else.
However, that deadline is approaching fast and it is unclear whether and what components will be delayed.
Under ASIC’s proposal, key items for the annual consent (apart from expected/standard content) are:
- the consent needs to name all account holders (where this may be different from the client);
- the consent needs to include information about the services that the client will be entitled to receive under the arrangement (we consider this is a double up, particularly when the FDS and renewal notice will be provided at the same time. Start to consider how these could be combined to avoid risk of errors in duplication of information);
- the consent must include the frequency, amount and time of payment of each ongoing fee during the next 12 month period (unless it can’t be determined and in which case a reasonable estimate must be provided with a description of methods of calculation);
- where fees are deducted from multiple accounts, the consent must show a breakdown of the proportion of the fees that will be deducted from each account;
- the consent must include a warning of the benefits to which the account holder is entitled that may cease or be reduced because of deduction of the ongoing fees (i.e. your insurance cover could cease if the fees make your account drop below $[x] or the fees you pay for the [insert name of product] may increase if the fees make your account balance drop below $[x]);
- a new consent is required each year at the same time as the renewal of the ongoing fee arrangement.
There are other items to include in the consent and the above needs to be adapted for fees deducted from super.
What is currently unclear is how the interaction will occur with the product provider (which is not the “fee recipient”). Currently advisers would need to pass the consent on to the product provider but how that works in practice is unclear. It is also unclear how this interacts with the new “look forward” FDS requirements.
ASIC has suggested in the CP that you can combine the annual consent and annual opt-in as long as the text is clear and concise. We will consider further how this would work and it would be good for you to start to think about how this would work with the data that needs to be populated in the consent and how systems would need to change to deal with this.
For the FSG changes, ASIC has made it clear that the “Not Independent” warning needs to be prominently displayed in a box under a bold heading on the first substantive page of the FSG (and cannot be footnoted). It needs to be in same size font as the predominant text in the FSG.
ASIC has also stated that it proposed to issue further guidance on ongoing fee arrangements and FDS which will be good to clarify a number of grey issues.
We are currently preparing a new annual consent template combined with renewal notice and FDS (and as separate documents too) for our clients to review and adapt as required once further guidance issued.
If you would like to discuss our take on your obligations in regard to ongoing fee arrangements and annual consent please feel free to reach out to one of the team.