Not separately stating what the adviser’s fee is

The principles of full disclosure and the various Regulatory Guides that apply both require that the fee payable to the adviser be separately identified – in whole dollars – in the SOA.

In the old days (some people call them the bad old days, but let’s not be provocative), clients were often in the dark when it came to how much their adviser was being paid. The adviser’s fee was paid as a commission from a product issuer, with the client not being told either the percentage base or the actual amount that their adviser received. (Often, the total amount paid by the client to the product provider was obscure as well).

This has now been done away with. Again, the basic idea with the specific disclosure of the adviser’s fees is that the client never gets a surprise – and especially not an unhappy surprise – when it comes to fees and costs. This is what the law requires. But, of course, it is also a really good principle for any business to apply.

Here is an example of a well-made fee disclosure:

Upfront Fees

Fee Value
Preparation of Statement of Advice $2,250

(Fees are GST free.)

Implementation Fees Value
Investments and insurance $400
Drawing up a will $200

Ongoing Fees

Meetings and email support as required; assistance with property purchase process and organising a binding financial agreement; education so that you feel comfortable managing your finances.

$250 per month

(no contract period; this can be reviewed on request)

It is a truism of marketing that only 5% of unhappy clients will express their displeasure to a business directly. The other 95%, of course, express their displeasure to everyone else. Unhappy surprises make for unhappy clients, which makes for negative word of mouth, complaints and other unwanted consequences for the adviser. Do everything you can to avoid unhappy surprises.

The Dover Group