In what I have said above, I have tried, as far as possible, to recommend changes to the substance of ongoing fee arrangements, rather than the form in which those arrangements are given effect. The heart of the matter is this: if a financial adviser and a client want to enter into an arrangement under which the client agrees to pay fees on an ongoing basis, the arrangement:
- must be renewed annually by the client;
- must tell the client clearly what fees he or she will pay, and what services he or she will receive in exchange for those fees; and
- must not permit or require the deduction of fees from any account held by the client except with the client’s express written authority, which must also be renewed annually.
Those requirements should apply to all ongoing fee arrangements, whenever made.
If ongoing fee arrangements have those characteristics, those arrangements will be unlikely to give rise to fees for no service conduct of the kind that was the subject of evidence before the Commission.
Recommendation 2.1 – Annual renewal and payment
The law should be amended to provide that ongoing fee arrangements (whenever made):