You might need to start sending Fee Disclosure Statements to new and existing retail clients with whom you have an ongoing fee arrangement as early as 1 July 2013 – unless you’re one of the brave hearted few who elected to start earlier!
Ongoing fee arrangements are engagements for more than 12 months to provide personal advice for which you charge a fee. Not all your relationships will fall into this category.
The date you first provided personal advice determines whether the client is “existing” or “new”. If it was provided before 1 July 2013, they’re an existing client, even if your ongoing fee arrangement started after that date. Otherwise, they’re a new client.
Why the distinction between existing and new? It impacts on when the FDS first needs to be provided. But for practical purposes, you can assume that it needs to be provided within 30 days of the anniversary of entering into the ongoing fee arrangement. For existing clients, it can be provided any time between 1 July 2013 and that date, effectively resetting the disclosure day.
Here’s 6 key tips for getting ready….
- List – Identify all clients with whom you have an ongoing fee arrangement. If your advice software can’t do it for you, use an excel spreadsheet to capture their name, address, services offered and provided, date of ongoing fee arrangement and fees charged in the past 12 months.
- Sort – Sort the clients by:
- The date on which the arrangement started. and
- For ease of administration, the services provided. This will be easier if you have defined packages of services e.g. “gold”, “silver”, “bronze”.
- Template – Prepare or purchase a template Fee Disclosure Statement. Customise it for your business. Code it into your advice software if you can, or set up a word merge document.
- Allocate – Decide when your Disclosure Day/s will be. Think about whether to bring it forward for some clients to “smooth” the work load. Allocate the clients into the intervals at which that you want to provide Fee Disclosure Statements, e.g. monthly, quarterly.
- Publish – Prepare your first batch of Fee Disclosure Statements. Check and double check them before sending.
- Analyse – What was hard? What didn’t work? Use the errors you find as a guide to simplifying and improving your process
A few more tips….
If you reset the Disclosure Day:
- The Fee Disclosure Statement still has to cover the past 12 months.
- Be clear that the ongoing fee arrangement only existed for part of that period and the fees and services only relate to that period.
When buying a portfolio:
- Ensure your due diligence checks that the seller properly provided Fee Disclosure Statements to ongoing clients.
- Include a warranty to this effect in the Purchase Agreement.
- Require the seller to provide you with the information you’ll need to prepare the next Fee Disclosure Statement
