The Future of Financial Advice reforms that were introduced in 2013 introduced the concept of a fee disclosure statement. The purpose of an FDS is to disclose annual fees paid by a client to a financial service provider.

The FDS must show the fees paid and the services that the financial planner agreed to deliver for that fee.

The FOFA reforms were designed to give clients information that would allow them to assess whether the fee they are paying their adviser is worthwhile, given the services received.

What the Royal Commission has exposed is that many Australians have been paying a fee but receiving no service.

There is a catch with the FDS, warns Phillip Win, managing director and senior financial planner at Profile Financial Services. If you engage a financial planner on a 12-month basis and agree to renew your fee each year by signing a new agreement and payment facility, you will not receive an FDS.

Also, the FDS rule does not include old investment products and insurance policies that were sold on a commission basis prior to FOFA.

“However, you are entitled to know what commission you planner does receive by asking,” Win says.

Win says that even if investors are not covered by the FOFA rules, they should be receiving regular statements with updates details of investments and insurance directly from the institution providing the products.

“If a financial planner was involved in the sale of those products, there will be a reference to that in the statements,” he says.

“You can contact the financial planner and ask them how much they are receiving and what services they are providing for the remuneration.”

Win says that if you decide to remove the planner from the investment or policy, the cost of the investment may not go down. In some cases the fee may be redirected to the financial institution administering or managing the product.

“Sometimes this occurs because of the policy of the institution. Other times there are structural barriers to changing fee structures, especially with old products.

“An alternative would be to transfer the policy to a planner who actually delivers a service for the money,” he says.