ASIC Guidance on asset-based fees a step too far
Part of ASIC’s guidance on conflicted remuneration has been taken a step too far, according to Claire Wivell Plater, managing director of The Fold.
“Under the new guidance, if an asset-based fee is paid to the AFS licensee, the licensee will now need the client’s clear and informed consent to pass on any portion of that to their corporate authorised representatives and advisers,” she said. “That will impose a very significant administrative burden on licensees which will add to costs. I think it is unnecessary.”
Ms Wivell Plater said that some advisers already provide some information to their clients about how commissions are distributed between the licensee, the corporate authorised representative (CAR) and the adviser in their SoAs but until now, were under no legal obligation to do so.
“The client’s main concern is the fee they will pay,” she said. “I don’t see why, for an independent licensee, the commercial arrangements between the CAR and the licensee, or the employment arrangements with advisers, are the client’s business. It’s akin to being asked to disclose to clients how a business funds its expenses or what it pays its employees. These matters are really none of the client’s business.”
Ms Wivell Plater said it would be different if the advice was about an in-house product. “In cases like that, the incentive for the CAR or adviser to recommend that product is relevant to the client,” she said.
“But a blanket requirement seems unnecessary to achieve the regulatory objective that has led to the abolition of commissions.”
Ms Wivell Plater also said the requirement was not in ASIC’s consultation paper. “I do think on this point ASIC has taken things a step too far,” she said. “What a client really needs to know is whether or not they are getting value for money.”
