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As a financial adviser, do you know your anniversary day?

With the enhanced fee disclosure regime for ongoing fee arrangements fast approaching, some financial advisers might need to update their disclosure diary.

The enhanced fee disclosure regime commences 1 July 2021, with a transition period for existing ongoing fee arrangements (’OFAs’) ending on 30 June 2022.

There are several changes to how financial advisers will disclose fees, obtain client consent and renew the OFAs.

What is an “anniversary day”?

The amending act has removed ‘disclosure day’ and ’renewal notice day’ and replaced them with the ’anniversary day’. The disclosure day and renewal notice day were determined by reference to the date the last fee disclosure statement (‘FDS’) was provided and the date that the arrangement was last renewed. The anniversary day is fixed as the anniversary of the day that the OFA commenced.

The definitions of disclosure day and renewal notice day allowed financial advisers to re-set disclosure days by providing the relevant document to the client early. Because the anniversary day is fixed, it appears that financial advisers will no longer be able to re-set the disclosure day or renewal day by providing an FDS early.

Financial advisers who routinely align their clients’ disclosure dates will need to consider how to change their practices to manage disclosure dates following implementation of the enhanced regime.

What about existing clients?

The adviser must issue an enhanced FDS to existing OFA clients before the end of the 12-month transition period. This might mean that a financial adviser issues an FDS after the date that would have been the disclosure day for the OFA. In that case, the enhanced FDS must cover the period from the last FDS provided, which will be more than 12 months. For example, if the disclosure day is 1 October 2021 and the financial adviser issues the transitional FDS on 1 January 2022, the FDS would cover the 15 months from 1 October 2020 to 1 January 2022. For those existing clients, the anniversary day will then be fixed on the day that the FDS was given during the 12-month transition period.

Understanding the renewal period

Financial advisers must provide an FDS to their client within the first 60 days of the renewal period each year.

The renewal period is 120 days, beginning on the anniversary date of the arrangement.

If the client does not renew within the renewal period, then at the end of the 30 days following the end of the renewal period (i.e. 150 days after the anniversary day), the OFA terminates.

Sections of the Corporations Act 2001 (Cth) inserted by the Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 (Cth) commence operation on 1 July 2021. If you need help complying with your obligations and understanding more about these changes, contact us and one of our Financial Services Team will be able to assist you.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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