Ongoing Agreements - End Of Transition Year
30 June 2022 marks the end of the 'transition period' for all ongoing advice agreements.
Who does this affect?
For all ongoing fee arrangements that were in force immediately before 1 July 2021, the Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 introduced transitional arrangements for fee recipients in relation to providing FDSs.
As a fee recipient, you must give the client an FDS between 1 July 2021 and 30 June 2022 (i.e. the transition period) for an existing ongoing fee arrangement. The day that you provide the client with an FDS during the transition period will become the anniversary day for that arrangement in each subsequent year.
What is the transition day for an ongoing fee arrangement?
The ‘transition day’ for an ongoing fee arrangement is defined in the law:
the day that you give an FDS to the client, or
the last day of the transition period (i.e. 30 June 2022).
What information do I need to include in an FDS during the transition period?
An FDS that you provide during the transition period must comply with the usual information requirements for an FDS. An FDS provided during the transition period must cover information for:
the previous year – a 12-month period that ends just before the transition day for the ongoing fee arrangement, and
the upcoming year – a 12-month period that begins on the transition day for the arrangement.
Actions Required:
If you had any ongoing service agreements in force immediately before 1 July 2021, you will need to ensure the following:
All clients have received an FDS during the transition period.
The FDS given to the client meets the above stated requirements (i.e. fees for the previous year, and the upcoming year).
Correctly updated the new 'anniversary date' in Xplan.
FAQS:
Does this apply to existing Fixed Term Agreements? No, these requirements only apply to ongoing service agreements. If your client has a fixed term agreement, you need ensure fee deductions cease at the end of the agreement.
What if a new client signed an new ongoing agreement? If you have a new client that signed a new agreement, you do not need to send an FDS. The anniversary date will be the date the new agreement was signed. You will need to send an FDS on the anniversary date in 2022/23.
What if my client signed a new ongoing agreement during the period? If your client signed a new ongoing agreement during the transition period, the new agreement will replace the existing agreement. The date of the new agreement is the new 'anniversary date'. You do not need to send an additional FDS.
What if my existing ongoing agreement client signed a new Fixed Term Agreement? If your client signed a new Fixed Term Agreement (i.e. was on an ongoing agreement, but transitioned to a Fixed Term), you do not need to send an FDS. The new Fixed Term Agreement replaces the old Ongoing Agreement. You need to ensure that fee deductions cease at the end of the agreement.
What if i havent sent an FDS? If you have not yet sent an FDS to your client during the transition period, you need to send one immediately. You will need to also disclose the fees paid by the client for the full period since the last FDS was sent. This may be more than 12 months. You will trigger the 'renewal period', in which the client will need to renew the agreement within 30 days.
What if i sent an FDS, but it didnt meet the new reporting requirements? If you have inadvertantly sent an FDS to a client which did not meet the above reporting requirements (for example, it only reported fees for the last 12 months), you will need to immediately send a new FDS that does meet these requirements. You wil also need to report the fees paid since the last FDS. This new FDS will trigger the 'renewal period', in which the client will need to renew the agreement within 30 days.
For further information, you can refer to the ASIC INFO 256:
We will be carrying out a review of all clients on ongoing agreements to ensure they have received an FDS during the transition period, and to also ensure the correct FDS has been sent.
If you have any questions or concerns please contact us immediately.