Costly Glitches Plague Fee Disclosure Under New DBFO Legislation
Costly Glitches Plague Fee Disclosure Under New DBFO Legislation
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As financial planners await forthcoming updates to the Delivering Better Financial Outcomes (DBFO) legislation, many are grappling with significant challenges arising from the first tranche, specifically concerning fee consent requirements.
These issues, unfortunately, seem to require legislative amendments as they fall outside the scope of regulatory fixes, amplifying the compliance burden on financial advisers, especially regarding breach reporting.
Challenges with fee disclosure have been highlighted by the Financial Advice Association of Australia (FAAA). Issues surrounding ongoing fee consents are central, with the initial intent of simplifying Fee Disclosure Statement (FDS) obligations facing substantial real-world hurdles instead. According to the FAAA, the objective of streamlining has backfired, resulting in duplicated forms and widespread confusion.
A notable legislative complexity includes the requirement for an account number on fee consent forms to authorise fee deductions from financial products, even for new accounts without available account numbers. The FAAA pointed out this flaw in the law imposes an extensive regulatory burden across the board.
Phil Anderson, FAAA General Manager of Policy & Advocacy, expressed that the problem stems from the convolutions of transitioning from prior arrangements and the ASIC rulings. Despite recognising these issues post-legislation, addressing them requires legislative amendments. The primary concern hinges on Section 962T of the Act, which mandates an account number's inclusion for Ongoing Fee Arrangements, though often unavailable during form completion.
The crux of the issue is whether the absence of an account number invalidates the consent form, a dilemma Anderson discussed extensively with Treasury and the ASIC. Treasury suggested in February 2025 that legislative changes were necessary for resolution, advising consultation with ASIC for regulatory clarification.
In subsequent discussions, ASIC maintained the necessity of the account number on consent forms, corroborating that alternative solutions were unviable under the existing legislation. The FAAA cautioned that such an approach could lead to automatic termination of affected fee arrangements, causing significant administrative strains.
This technical flaw in the DBFO legislation has triggered substantial administrative efforts from advisers to address the submission of incomplete consent forms, resulting in numerous breach reports with considerable associated costs. Despite early awareness of the issue, the current legal framework offers no immediate remedy by either the Minister or ASIC.
In summary, the regulatory landscape under DBFO, as it stands, has created considerable challenges and expenses for financial advisers, highlighting the need for legislative attention to rectify these unintended consequences.
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