Fee Disclosure Document
Legislation changes took effect from 1 July 2021 with a 12-month transition period. The key notes were:
- Grandfathering was removed for pre-FOFA clients, all clients with an ongoing fee arrangement need to receive an annual FDS and renewal within 60 days after their anniversary date.
- Anniversary dates will be set at the date you provided the client with the FDS during the transition period and will be fixed at that date each year going forward. You can no longer bring them forward by issuing a renewal early
- Introduction of Fee Consent requirements for fees deducted by product providers.
As we approach the end of the transition period, this update is to confirm the FDS requirements and address some FAQ’s regarding the post-transition state.
Requirements of an FDS
A Fee Disclosure Statement (FDS) must be provided to any retail client with an ongoing fee arrangement within 60 days after their anniversary date. The FDS must meet the following requirements:
- Document must be written and sent out within 60 days after anniversary date
- Written consent (either wet or electronic) must be provided by the account holder, can be accepted by signing the document or via email confirmation
- The enhanced FDS must include:
- An explanation of why member consent is being sought
- Anniversary date
- A clear statement that client can choose to continue (opt-in) or cease the service arrangement and that non-receipt of consent will be equivalent to not renewing the agreement
- Services entitled to receive and services used by the client over the previous 12-month period
- Actual fees (and type) paid by the client over the previous 12-month period
- Services to be provided in the coming 12-month period
- Actual or estimated fees (and type) client will pay in the coming 12 months, including a summary of how these are calculated
- An end date of when the signed correspondence needs to be returned (no more than 120 days after the anniversary date)
- A notation that fees will cease within 30 days of the end date (a maximum of 150 days after the anniversary date) if the client does not renew their service/fee arrangement
- Name and contact details of the fee recipient
- Fees must be in dollars
|FDS & renewal sent to Client||Must be within 60 days after anniversary date Implies consent from service provider to continue ongoing fee arrangement Must have a clear statement that the client can choose to continue (opt-in) or cease the service/fee arrangement and non-receipt of consent will be equivalent to not renew|
|Client returns consent (opts-in)||Must be within 120 days of anniversary date Must be signed and in writing (electronic via DocuSign or email will be acceptable)|
|Client does not return consent||After 120 days from anniversary, client is deemed to opt-out if they have not signed Service provider has additional 30 days to switch off fees Service provider has 10 days to notify product provider so that fee collection can be turned off|
|Client withdraws consent||Service provider has 30 days to switch off fees Service provider has 10 days to notify product provider so that fee collection can be turned off|
Can I change the anniversary date of my client?
The only way to change the anniversary date would be to terminate the existing fee arrangement and commence a new arrangement (this can occur on the same day). Once the old arrangement is terminated, you must stop charging ongoing fees under that agreement, including notifying third-party account providers that fees can no longer be deducted under the old arrangement. The date that the new ongoing fee arrangement commences will be the new anniversary date. NOTE: you will need to provide product providers with an instruction to cease fees under the old instruction and a separate instruction to commence fees under the new arrangement.
What if I don’t know the exact fees?
If the amount of an ongoing fee cannot be determined at the time of preparing the FDS, you must include:
- A reasonable estimate of the amount, and
- An explanation of the method used to work out the estimate based on all the relevant information available to the fee recipient at the time the estimate is made.
Can I give the FDS electronically?
Yes, you can give an FDS electronically if it is in writing – as an email, on a webpage or through an app.
How do I know if it is an ongoing fee arrangement?
An ongoing fee arrangement exists when:
- The fee recipient gives personal advice to a retail client
- The fee recipient and client enter into an arrangement, and
- Under the terms of the arrangement, the client must pay the fee recipient a fee during a period of more than 12 months.
What are the consequences of not complying with the ongoing fee arrangement obligations?
If a fee recipient fails to comply with the OFA obligations, the ongoing fee arrangement will terminate. The fee recipient must not continue to charge ongoing fees after termination of the ongoing fee arrangement. Civil penalties apply to a breach of this requirement.
Failure to comply with the obligations to provide an FDS or the obligation not to detect, or arrange to deduct, ongoing fees without the client’s written consent is also subject to civil penalties.
For More Information
GRC Essentials can help
If you require any assistance we can offer training for your personnel, FDS and Consent templates, or a review of you FDS documents. Please don’t hesitate to contact us if you have any questions or if we can help you with any of your compliance matters.