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A message from the AFA on of the provision of Fee Disclosure Statements

16 Jun 2021

From AFA - Association of Financial Advisers

Phil Anderson

At the end of last week Minister Hume announced the intention of the Government to issue a regulation to address the issue that the AFA identified a few weeks ago in terms of the provision of Fee Disclosure Statements (FDS) during the Annual Renewal transition year (1 July 2021- 30 June 2022).

The law requires advisers to provide an FDS during the transition year that includes a 12-month period up to the day immediately before the FDS is provided to the client. The Government has acknowledged that this will be difficult. We have previously said that this would be impossible.

The NEW proposal is that advisers will be required to provide an FDS that covers a 12-month period, with the first 10 months based upon the actual fees paid and then an estimate for the remaining two months that would cover the period up to the day before it is provided. We appreciate that the requirement to add an estimate for the final two months, will add additional complexity and this might make FDSs more manual than usual during this transition year.

To help explain this, we will use an example of an FDS year that covers the period 1 October 2020 to 30 September 2021. The adviser would need to use the actual fee data for the first 10 months (1 October 2020 to 31 July 2021) and then add an estimate for the remaining two months (August and September 2021). Once the FDS data for the first 10 months is available in August 2021, the team would then need to add the estimate for the remaining two months, do all the necessary checks and then provide the FDS to the client on 1 October 2021. This would lock in 1 October as the anniversary day and mean that FDSs would cover the period 1 October to 30 September in future years. Please be aware that from 1 July 2021, FDSs need to cover services and fees for the last 12 months and services and fees for the next 12 months.

The Minister has committed to this regulation being in place by 1 July 2021. We hope to know more soon.

We thank the Minister for responding to this issue and coming forward with a solution.

By Phil Anderson, Acting CEO and General Manager – Policy & Professionalism

Tags:Phil Anderson

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