The second round of the royal commission’s public hearings has seen AMP levelled with claims it “trapped” retail investors in “uncompetitive” platforms and charged clients fees for services they did not receive, while the Commonwealth Bank acknowledged that if fees for no service was a sport, it would be a “gold medallist”.

Profile Financial Services’ managing director, Phillip Win said while the preliminary findings from the royal commission make for interesting reading, he highlighted three key questions that clients of financial planners should be asking.

1.       What is a fee disclosure statement?

With the arrival of the Future of Financial Advice (FoFA) reforms on 1 July 2013, the concept of a Fee Disclosure Statement (FDS) was also introduced.

Its objective is to explain the fees clients pay to a financial service provider over a 12-month period with a set anniversary date, which means those who have been clients of a financial planner since 1 July 2012 should have received at least five FDSs.

“It is important to note that the requirements of a FDS not only include the fee payable, but also the services that the financial planner agreed to deliver to you for the fee payable.”

2.       Why haven’t I received one?

“Your relationship with your financial planner (and how the financial planner is remunerated) may be based on an insurance policy, or an old investment policy, where commissions are built into the cost structure,” Mr Win said, explaining that commissions are not required to be included in a FDS.

Nevertheless, clients have a right to know the commission received by their planner and can obtain this information just by asking.

Additionally, clients who have engaged a planner on a yearly basis and agree to renew their fee by signing a new agreement and associated payment facility also won’t receive a FDS.

However: “If you have a direct debit arrangement in place with no end date, you should still receive an FDS.

“This is because the fee would continue to be paid to the financial planner beyond the 12-month period if either of you are unable to meet or execute the new agreement.”

3.       What do I do now?

Mr Win said financial planners “attached” to certain products will be referenced in the FDS and will continue to receive commission until the client asks how much they receive, and what services they are providing in return.

Until that occurs, “the gravy train will continue”.

Clients should take note that detaching a financial adviser from a policy may not result in a lower cost of investment.

That’s because the fee could just be re-directed to the financial institution running the policy or investment.

“Sometimes this is just policy of the institution, other times there are real systems and structural barriers to changing this (especially for legacy products).

“Either way, an alternative is to transfer the policy to a financial planner who actually delivers a decent service for the money.”