A new report by an Australian watchdog has highlighted widespread non-compliance of fee disclosure obligations by financial advisers.
The findings were part of Australian Securities and Investments Commission’s (ASIC) ‘Compliance with the fee disclosure statement and renewal notice obligations’ report.
The report found Australian financial services (AFS) licensees failing to provide accurate information on advice fees. They were also found to charge the consumers even after ongoing fee arrangements were scrapped.
The report is based on the assessment of fee disclosure statements (FDSs) and renewal notices (RNs) from 30 randomly selected AFS licensees.
Overall, 1496 FDSs and 373 RNs were assessed by ASIC. Of these, 176 FDSs were reviewed in detail against legal compliance requirements.
The report found that 80% of the 176 FDSs did not include all necessary information on services to be provided to the clients.
Around 73% did not cover all information on services that customers received, while 44% did not contain client fee details.
According to ASIC commissioner Danielle Press, this raises concerns on industry practices with regard to fee disclosure to clients.
Press said: “Our review has found widespread non-compliance with fee disclosure obligations across the sample of AFS licensees and their representatives, suggesting that compliance with the FDS and RN obligations may be an industry-wide problem.
“Consumers are at risk of receiving inaccurate fee disclosure statements or in some cases, none at all.
“This is a timely reminder that while disclosure alone is not enough as a consumer protection mechanism, transparent and timely disclosure still has an important role to play.
“The 30 licensees in our review have been advised of our concerns, and we are strongly urging all AFS licensees to immediately take steps to improve the robustness of their compliance measures.”
Currently, ASIC is assessing multiple other advice licensees for similar breaches, following which, it will consider taking the legal route.