New legislation and changes to your annual renewal process

As of July 1 2021, new legislation regarding the annual service renewal process for ongoing fee-paying clients came into effect.

The new legislation, arising from the Hayne Royal Commission, was designed to increase clients’ awareness and understanding of both the services they receive and the fees associated with those financial advice services.

The new legislation focuses on what was previously referred to as your annual FDS/Opt-in process, where you were presented with a Fee Disclosure Statement (FDS) outlining the services received and fees paid during the previous 12-month advice period.  At the same time, you would have been asked by us, your Advisory office, to confirm your acceptance to continue under the existing fee arrangement – commonly referred to as your “opt-in”.  This opt-in may have been done every 12-months or 2 years.

Under the new legislation, we now refer to this process as the Annual Renewal process, which will include your FDS and other items outlined below:

1. Fee Disclosure Statement – including:

• Fees paid over the last 12 months
• Agreed services for the last 12 months

2. Forward Fee Estimate

• Fee estimate for the next 12 months
• Services available over the next 12 months

3. Renewal Notice

• Client ongoing service agreement renewal every 12 months

4. Product Fee Consent

• Client authorisation for fee collection (where fees are being paid directly from a financial product or service provider.)

Items 1-3 will be presented to you in a single document and if Item 4 is applicable to you, your adviser will provide you with the relevant fee authorisation process.

The complete Annual Renewal process will occur every year and is essentially designed to:

• Confirm that you received the services you were entitled to in the previous 12 months
• Confirm that you were charged accordingly
• Ensure that you understand the services that will be provided for the next 12 months
• Ensure that you are clear on the fees associated with those services.

More on Product Fee Collection

Prior to the new legislation, your consent to deduct fees from any products or services you use was required only at the time of establishing the product or service. From July 1 2021 your adviser must obtain your consent for fees to be collected from products (excluding credit cards and basic banking accounts) every year.  The way in which you receive this product consent form will vary from provider to provider and your adviser will assist you with this process.

Where does my Client Service Agreement fit in?

Your Client Service Agreement (or CSA) is the underlying contract you have agreed with your adviser and it outlines the services that your adviser will provide and the associated fee structure.  You don’t need to re-sign this every year unless the nature of the services provided or the fee arrangement changes, in which case a new CSA will be created and signed.  For example, if your circumstances change and you now require an additional service from your us, a new CSA outlining the new services and any associated fee changes will be created.

In short, your Annual Renewal process is essentially the yearly renewal of the service and fee arrangement outlined in your CSA.

If you have any questions, please don’t hesitate to contact us.