ASIC to crack down on platform fees

Since the end of the Royal Commission, ASIC has been collecting information from platforms on the fees they charge and the financial advisers using them.

In a letter obtained by Financial Standard, ASIC requested the names of every retail client who had an ongoing fee arrangement at any time following 1 July 2013. If the ongoing fee arrangement was not current at the time of ASIC's letter, the regulator wanted to know why that arrangement was terminated.

ASIC also asked for the names of policies and procedures used by individual platforms to prepare fee disclosure statements and monitor and audit compliance with fee disclosure obligations.

This included requiring platforms to disclose how they prepare renewal notices, record and action client response and monitor and audit compliance with renewal notice obligations.

The letter, which was sent in October 2018, requested platforms provide information about whether there is a standard template for their fee disclosure statements and who is responsible for preparing those statements.

The regulator wanted to know exactly how much information platforms had about fees paid by retail clients and how they determine which fees to include in the fee disclosure statements.

ASIC's concerns with platforms' compliance with fee disclosure statement requirements are lengthy, extending to questions around whether fee disclosures were given to clients by financial advisers and if not, who is responsible for that task.

It also asked how fee disclosure statements are reviewed before they are given to clients and whether licensees had taken steps to standardise the date that most clients are given their fee disclosure statements.

Further, ASIC wanted to know how platforms determine which services clients were entitled to receive, which they actually received and how the person preparing the fee disclosure would determine that.

If platforms were aware of cases where clients did not receive services they were entitled to, ASIC wants to know what internal processes the platforms have in place to identify why the client did not receive those services - and, if relevant, whether platforms remediate the situation and report breaches internally or to ASIC.

How advisers charge fees for services they conduct through a platform seems to be part of what ASIC is looking into. It asked platforms whether personal or general advice fees were included in the fee disclosure statement.

It also asked whether fee disclosure statements included details of commissions paid by the client that were not the subject of an ongoing fee arrangement.

Platforms must report whether they conduct audits and reviews to ensure compliance by the platforms themselves and financial advisers with fee disclosure and renewal notice obligations.

They must also report ASIC any breaches of the fee disclosure or renewal notice obligations by either licensees or its current or former representatives.

If there were any breaches, ASIC wanted proof of them having been reported- and if not, why not.

Speaking with Financial Standard, Mason Stevens managing director Thomas Bignill explained that Mason Stevens has been part of an ASIC questionnaire regarding managed discretionary accounts (MDAs).

Bignill said: "I think ASIC is doing a good job with working through the limits of MDAs and trying to improve the governance."

He added: "There were people viewing MDAs as a licence to do what you want on a platform. That finally got outlawed about 18 months ago so people had to get an MDA licence or align with a provider. Some have strong governance but some don't. It's slowly tightening up."

Bignill believes ASIC is working out which models in the industry work well for clients and which don't - he described the correspondence Mason Stevens has had with ASIC as "worthwhile".

"I think ASIC will be more vocal. I think that's a good thing, the more clarity the better," Bignill said.

Xplore Wealth acting chief executive Don Sharp also confirmed Xplore has had correspondence with ASIC in regards to MDAs.

"We've had chats with ASIC and have a fairly good idea of what they're looking to do," Sharp said.

Like Bignill, he believes the regulator is looking at the different business models that exist on platforms when it comes to managed accounts offerings and trying to decipher what works best - and possibly create some enforced consistency.

Sharp thinks ASIC is particularly concerned about capital requirements for platforms.

"ASIC is going to have to impose the same capital requirements on a managed account operator that they have for responsible entities and wraps - so a maximum of $5 million," he said.

"They'll still let us run the money the way we're doing it - and a wrap do it the way they're doing it - but they'll change the capital requirements."

Financial Standard understands the findings of ASIC's review will be published by the end of the year.

Read more: ASICMDAMason StevensRoyal CommissionThomas BignillDon SharpXplore Wealth
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