Fee disclosure inconsistencies between Statements of Advice (SoAs) and Records of Advice (RoAs) are a recurring issue flagged by auditors—and a growing concern for AFSL holders. While often unintentional, these discrepancies can mislead clients and expose licensees to compliance breaches.
At AICS, we’ve identified three common red flags:
- Outdated Fee References: The ROA discloses the same fee as the last SoA, but that SoA was issued months (or years) ago. If the fee has changed since, the ROA must reflect the current arrangement.
- Fee Mismatch: The SoA shows a lower fee than the current charge. If the ROA doesn’t explain the increase or reference a new agreement, it may be deemed misleading.
- Inconsistent Formats: The SoA discloses fees as a percentage (e.g. 0.88%), while the ROA states a dollar amount (e.g. $3,300). Without context, this can confuse clients and raise auditor concerns.
📜 Key Legislative References
- Corporations Act 2001 – Section 947C(2): Requires clear disclosure of all fees, commissions, and remuneration in advice documents.
- Corporations Regulations 2001 – Regulation 7.7.09: Mandates that ROAs must disclose all fees and commissions, including any changes from the last SoA.
- ASIC INFO 266: Clarifies when an ROA can be used and what must be included, including fee disclosure and conflicts of interest.
- ASIC RG 175: Provides detailed guidance on adviser conduct and disclosure obligations, including fee transparency and record-keeping.
😟 Pain Points for Licensees and Advisers
- Risk of misleading disclosure: Even minor inconsistencies can lead to clients receiving inaccurate fee information.
- Inconsistent documentation across advice files: Variations in how fees are presented between SoAs and ROAs can create confusion and compliance risk.
- Auditor queries and remediation costs: These issues can lead to time-consuming, costly queries and remediation work.
🛠️ AICS Best Practice Guidance: To address these challenges, AICS recommends the following practical guidance:
- Always cross-check ROA fees against the latest signed agreement.
- Use consistent formatting (either % or $) across documents—or clearly explain the conversion.
- Include a note in the ROA if the fee has changed since the last SoA.
🏆 Why It Matters: Clear, consistent fee disclosure builds trust with clients and reduces the risk of audit findings or AFCA complaints. Failure to align ROA and SoA disclosures can lead to remediation, reputational damage, and potential breaches of the Corporations Act.
Need help reviewing your advice templates? Contact AICS https://www.aicsolutions.com.au/contact or email hello@aicsolutions.com.au
References:
