Preparing an Fee Disclosure Statement

The fee recipient or their assignee holds the obligation to provide the FDS to their client and must contain information from the previous 12 month period in relation to:

  1. the amount of fees paid by the client;
  2. the services that the client was entitled to receive; and
  3. the services they actually received.

In the event that a retail client is transferred from one AFS licensee or representative to another, the fee disclosure statement must contain information about the fees paid and the services received and were entitled to from both the original adviser and the new adviser.

Who must provide the FDS?

The fee disclosure statement must be provided by the ‘fee recipient’ defined as;
(a) the AFS licensee or their representative who enters into the ongoing fee arrangement with the client; or
(b) if the rights of the person who entered into the ongoing fee arrangement have been assigned, the person who currently holds hose rights (the assignee)

Please note that when a representative is responsible for providing an FDS, the AFS licensee must monitor the representative’s comp0liace with the FDS obligations, in accordance with the licensee’s general obligation.

Did you know you can outsource your FDS administrative requirements.

RG 245.20 states that a fee recipient may outsource some of its administrative or compliance functions under a commercial arrangement with a third-party agent. For example, a fee recipient may engage an administration provider to generate and provide FDSs on its behalf. However, the fee recipient cannot transfer the actual obligation or liability itself, and will remain responsible for ensuring that its obligations are met: see RG 104.34–RG 104.36.

Do you need to provide an Fee Disclosure Statement?

The following list provides examples of when you DO NOT have to provide an FDS to your client;

  1. fees are received as part of a payment plan meeting prescribed requirements – an example is an upfront advice fee paid in instalments
  2. an arrangement is made by which the only fee payable is from commission from an insurance premium; and
  3. an arrangement to the extent that the fee payable is a product fee.

When does an FDS need to be given?

Fee recipients must provide new clients with an FDS before the end of a period of 30 days beginning on the disclosure day. That is, if the disclosure day is 1 June, the FDS can be given at any time before 30 June

What is the ‘disclosure day’?

The rules for identifying the disclosure day are the same for new and existing client;
The disclosure day will be the anniversary of the date that the ongoing fee arrangement was entered into.

Fee Disclosure Statement Disclosure Day
For advisers with existing clients prior to 1st July 2013, fee recipients will need to determine (e.g. by reviewing client files) when they (or a previous fee recipient under the ongoing fee arrangement) first entered into an ongoing fee arrangement with each existing client.

Depending on the circumstances, this may, for example, be the date an authority to proceed was signed or a financial product was acquired by the client.