Yellow Brick Road is expecting to compensate wealth clients close to $1 million for failing its fee disclosure statements obligations.
During the 2019 financial year, the ASX-listed firm identified some advice clients with ongoing fee arrangements may not have received a fee disclosure statement or a renewal notice within the time limits prescribed by the Corporations Act.
YBR said it made a provision for $928,000 and is conducting an internal audit of records and will contact affected clients.
According to ASIC, fee disclosure statement obligations require advice providers to give retail clients with ongoing fee arrangements an annual statement setting out fees to be paid and services they are entitled to receive.
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YBR flagged that provisions of this nature require "significant levels of judgement" and a sample-based review was conducted to estimate the fees that may need to be refunded and if it indeed breached the Act.
"That programme has not yet been completed and is ongoing. The consolidated entity has raised a provision for instances where it is established that a breach of the Corporations Act has occurred and where the appropriate remediation action may require financial compensation," latest statutory accounts read.
Overall, YBR made a net loss after tax of $37.39 million for FY19, the majority of which ($33.95m) came write downs of the wealth management and lending businesses.
In May, chair Mark Bouris announced the wealth business restructure will result in job cuts; Frank Ganis stepped down as group chief executive to a part-time role.
In 2018, the wealth division's products, cost structure, scalability and financial performance underwent a review.
"In particular, funds under management did not meet management's expectations. Ongoing negative sentiment surrounding the Royal Commission into the Banking, Superannuation and Financial Services Industry created significant uncertainty which had adversely affected the market and consumer sentiment which together resulted in the impairment," Bouris said.
He added that the firm is currently dealing with a number of tenderers for the sale/restructuring and outsourcing of the wealth business.
"Again, the positive financial effect of this won't be booked until at least the first half of the 2020 financial year."