Fee disclosure has long been a core requirement within financial advice. Clients should understand what they are paying, what services they will receive, and how those costs may affect their overall financial position.
While this principle appears straightforward, recent file review discussions within AICS highlighted situations in which fee information was technically disclosed, but advisers relied heavily on references to external documents or existing fee arrangements to convey the details. In these circumstances, the challenge is not whether fees were disclosed, but whether the client’s understanding of those fees can be clearly demonstrated.
Many advice practices operate on the assumption that ongoing clients already understand their fee arrangements. Annual reviews, Fee Disclosure Statements, and renewal notices may have been provided previously, creating the perception that advisers do not need to revisit fee discussions in detail.
However, from a regulatory and client perspective, understanding should never be taken for granted.
Where advice documents simply refer clients to another document for fee information, questions can arise about whether the client actually understood the costs involved and how those costs relate to the advice being provided. This is particularly relevant where advice relationships have existed for many years, and fee arrangements have evolved over time.
Fee disclosure is not merely a compliance exercise. It forms part of the broader obligation to ensure clients can make informed decisions. To make an informed decision, clients must clearly understand:
- What they are paying?
- What services they are receiving?
- What value is being delivered?
- How fees may change over time?
- Any potential conflicts associated with remuneration arrangements?
One of the risks of incomplete fee discussions is that advisers may become focused on meeting disclosure requirements rather than demonstrating an understanding of the client. A document may technically include all required information, yet still fail to support a clear and meaningful conversation about cost and value.
AFCA complaints and regulatory reviews often focus on evidence. When disputes arise, the question is not simply whether fee information existed somewhere within the client file. The question becomes whether the adviser can demonstrate that the client understood the arrangement and made an informed decision.
Strong fee disclosure practices go beyond the minimum disclosure obligation. They connect fee discussions directly to the advice being provided and reinforce why particular costs are reasonable in the context of the client’s objectives.
Firms can strengthen their approach by:
- Clearly explaining advice fees within advice documents.
- Avoiding unnecessary reliance on external documents alone.
- Recording discussions regarding fees and value.
- Ensuring fee arrangements remain relevant to the services provided.
- Reviewing whether disclosures support client understanding rather than simple compliance.
In an environment of increasing regulatory scrutiny, transparency remains one of the strongest protections available to advisers and licensees.
Ultimately, fee disclosure is not about demonstrating that information was provided.
It is about demonstrating that clients genuinely understood the financial commitment they were making.
Call To Action
Clear fee disclosure is about more than providing information, it is about ensuring clients genuinely understand the costs associated with their advice.
As advice relationships mature, assumptions can develop around what clients already know about their fee arrangements. However, regulators, auditors and AFCA increasingly focus on whether advisers can demonstrate that fee discussions occurred and that clients were able to make informed decisions based on a clear understanding of both costs and services.
AICS provides practical guidance and support to help advisers and licensees strengthen fee disclosure practices, improve client communication, and ensure documentation supports transparency and informed consent.
If you would like to review your current fee disclosure framework and client communication processes, contact Cheyenne and the team at [email protected] or call 07 3251 2481.
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