AFA News 30 June 2021. On 11 June 2021, Minister Jane Hume issued a media release to advise that the Government would issue a regulation to fix the problem that was created by the Annual Renewal legislation requiring Fee Disclosure Statements (FDS) to be issued within one day of the end of the FDS period during the transition year (1 July 2021 to 30 June 2022).
The regulation requires advisers to prepare an FDS on the basis of at least 10 months actual fees and as much as two months of estimates. This will allow the preparation of the FDS to occur from the eleventh month and enable advisers sufficient time to provide it on the day after the end of the period included within the FDS. This is mandatory and also sets the Anniversary day for future years. ASIC will shortly issue an updated FAQ (Info Sheet 256) to explain the requirements of the FDS during the transition year.
To review the regulation please click here. As this regulation includes a number of other matters, please focus on regulation 7.7A.11(2), under Section 20 on the bottom of the last page. Please click here to see the explanatory statement, where this measure is explained at the bottom of page five.
ASIC have issued an updated FAQ (Info Sheet 256) to explain the requirements of the FDS during the transition year. This is set out in Questions 15 and 22. We understand that the transition year FDS does not need to separately disclose the actual amount and the estimate amount, as long as it is clearly explained that it is based upon actuals and an estimate. Question 22 also explains that the FDS can be based upon 11 months of actuals and a one month estimate.
Question 3 has also been updated to explain that ASIC would not consider that a commission arrangement is entered into with the clear consent of, or at the direction of the client merely because it has been disclosed in an SoA. This helps to address a concern that was raised about the need to disclose life insurance commissions in FDSs. Seemingly this might only be required for holistic advice where the client agrees to a total fee, where they specifically direct that some of it be paid through the receipt of a commission on life insurance policies.
For any questions on Annual Renewal, please email firstname.lastname@example.org.
Issued 30.06.2021. AFA Policy & Education Update