Australian regulator finds extensive failings in advisors’ fee disclosure

The Australian Securities and Investments Commission (ASIC) published a report on Thursday that details the findings of a review that examined financial advisors’ compliance with fee disclosure obligations and client-charging practices.

The report indicated that the regulators found extensive failings.

In particular, the review found that 80% of fee disclosure was incomplete, and 44% of advisors didn’t disclose the fees that clients paid.

It also found that more than half of the firms reviewed didn’t have procedures in place to ensure that ongoing fee arrangements terminate as scheduled, leaving clients at risk of paying ongoing fees when they shouldn’t.

“Our review has found widespread non-compliance with fee disclosure obligations across the sample of [firms] and their representatives, suggesting that compliance with [their] obligations may be an industry-wide problem,” ASIC commissioner Danielle Press said in a statement.

“Consumers are at risk of receiving inaccurate fee disclosure statements or in some cases, none at all,” she said.

ASIC said that its findings have been reported to the firms that were reviewed, along with its expectation that the firms will remediate affected clients.

The regulator also reported that it is currently investigating a number of other financial advisory firms for potential breaches of these requirements.

“At the conclusion of these investigations, ASIC will determine whether court action is appropriate,” the report said.

In the meantime, the regulator said it is “strongly urging” all firms to immediately enhance their compliance in these areas.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.