Costly Glitches Plague Fee Disclosure Under New DBFO Legislation
Costly Glitches Plague Fee Disclosure Under New DBFO Legislation
1
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
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.
Published:Wednesday, 13th Aug 2025 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Reserve Bank of Australia's (RBA) recent decision to reduce the official cash rate by 25 basis points to 3.60% presents a significant opportunity for small and medium-sized enterprises (SMEs) across the nation. This adjustment, aimed at addressing moderating inflation and a tight labour market, is set to lower borrowing costs, thereby facilitating business growth and expansion. - read more
In a significant shift within Australia's financial landscape, small and medium-sized enterprises (SMEs) are increasingly opting for non-bank lenders to meet their financing needs. Recent data indicates that demand for non-bank lending among SMEs has reached 55% in 2025, marking a substantial increase from previous years. - read more
Business credit refers to the creditworthiness of a business, distinct from personal credit. It enables businesses to establish a credit history that is linked to their EIN (Employer Identification Number) rather than the owner's personal SSN (Social Security Number). - read more
Cash flow refers to the movement of money into and out of a business. This includes revenues from sales, payments to suppliers, salaries, and other operational expenses. Effective cash flow management ensures that a business can meet its financial obligations and invest in growth opportunities. - read more
Need Help Finding a Loan?
All finance quotes are provided free (via our secure server) and without obligation. We
respect your
privacy.
Knowledgebase
Principal: The original sum of money invested or lent, on which basis interest and returns are calculated.
