Secondary

fees

To fee, or not to fee?

The right to charge additional fees, and particularly “admin” fees, has long been a bone of contention, particularly in the short-term industry where it is particularly prevalent.

The latest draft General Code of Conduct (GCoC), which closed for industry input yesterday, contains three new paragraphs which aims to provide clarity on this thorny issue.

3A. Financial Interest and conflict of Interest management policy

(1) (a) A provider or its representatives may only receive or offer the following financial interest from or to a third party –
(i) commission authorised under the Long-term Insurance Act, 1998 (Act No. 52 of 1998) or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);
(ii) commission authorised under the Medical Schemes Act, 1998 (Act No. 131 of 1998);
(iii) fees authorised under the Long-term Insurance Act, 1998 (Act No. 52 of 1998), the Short-term Insurance Act, 1998 (Act No. 53 of 1998) or the Medical Schemes Act, 1998 (Act No. 131 of 1998);
(iv) fees for the rendering of a financial service in respect of which commission or fees referred to in subparagraph (i), (ii) or (iii) is not paid, if –
(aa) the amount, frequency, payment method and recipient of those fees and details of the services that are to be provided by the provider or its representatives in exchange for the fees are specifically agreed to by a client in writing; and
(bb) those fees may be stopped at the discretion of that client;
(v) fees or remuneration for the rendering of a service to a third party;

Our view has always been that administrative costs form part and parcel of commission, and that charging an additional fee is in contravention of the above. What the above additions to the GCoC appears to aim to achieve is to ensure that the client has to specifically agree to such fees, and has the right to cancel it at any time.

This issue is also contained in in the Retail Distribution Review, where further discussion will hopefully bring clarity.

If in doubt about whether you are legally entitled to charge an admin fee or not, consider these other words from the Bard of Avon: “To thine own self be true”.

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