In a recent case, a couple wanted to reduce the amount they paid for their personal insurance. They were phoned by an adviser offering to help them and were told there would be no charge for a meeting.

The adviser prepared a detailed report with recommendations for changes to their insurance arrangements.  Eventually, the clients decided not to go ahead. They were then invoiced $450 plus GST, which they disputed.

The adviser said the clients should have been aware that there was a clause in his company’ scope of service and engagement agreement that said a fee could be charged if no business was transacted. The couple had signed a copy of the disclosure statement.

The adviser felt that in view of the amount of work he had done, he was entitled to make the charge.

Once FSCL became involved, the adviser decided to write off the fee because of the costs involved in going through the complaint process.

FSCL chief executive Susan Taylor said it was a relatively common complaint although most cases were referred back to the adviser to settle directly.

She said it was appropriate to charge a fee when work had been done but no commission would be earned, provided the fee was clearly disclosed in the relevant documents.

“Advisers are entitled to charge a fee, however we believe the fee should be based on the time and service provided. We do sometimes see a fee that is a straight clawback of commission which can be several thousand dollars depending on the type of product and I don’t think that’s appropriate. The fee should be fair based on the scope of service and time involved.”

FSCL would receive two or three similar complaints a month, she said, although it did not get involved in most of them.

It was not uncommon for advisers to decide it was not worth the cost of going through the complaints process and write of the fee, she said. “It’s a customer service gesture. Sometimes they make a practical decision, if it is a small amount of money involved, to reach a settlement.”