To begin our conversation series, we will discussthe affects FoFA has on your business and the steps Infocusis taking to support you through this important transition.

1. The Future of Financial Advice
To begin our conversation series, we will discuss
the affects FoFA has on your business and the steps Infocus
is taking to support you through this important transition.
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2. What is happening with FoFA
The FoFA reforms focus on improving the quality of financial advice, particularly product
recommendations, and expanding the availability of more affordable forms of advice.
The FoFA legislation was passed by Parliament on 25 June 2012 and became law on 1 July 2012.
The reform will become mandatory for Infocus from 1 July 2013.
What are the key areas of the reform?
Best interest
duty
Opt in and fee
disclosure FoFA Scaled advice
Ban on
conflicted
remuneration
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3. What is happening with FoFA
The Government expects the reform to provide the following benefits:
• adviser interests will become aligned with client interests, leading to more client-focused advice
and greater adviser engagement with clients;
• product recommendations will not be influenced by commissions given to advisers by product
issuers;
• clients will be less likely to suffer detriment as a result of excessive fee arrangements or sub-
optimal investment strategies;
• a more competitive advice market;
• greater availability of advice;
• advisers will be discouraged from recommending imprudent investment strategies, for example,
strategies that rely heavily on borrowed funds;
• a reduction in product fees which will result in significant savings for consumers; and
• less rogue advisers in the industry.
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4. What is happening with FoFA
Who benefits from the reforms?
Consumers will greatly benefit from a structural change in the financial advice industry in a way that
will outweigh the implementation costs to industry.
Overall, the quality of financial advice will improve, leaving Australians better equipped to make
decisions about their finances.
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5. How will the new rules affect your business?
Best interest duty
Advisers will be required to act in the best interests of Best interest
their retail clients and place their clients’ interests duty
ahead of their own when developing and providing
personal advice.
Opt-in and fee
disclosure FoFA Scaled advice
Ban on
conflicted
remuneration
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6. How will the new rules affect your business?
Scaled advice
The Government has clarified much of the confusion Best interest
around scaled advice and removed any concessions duty
for intrafund advice. All providers are now bound by
the same rules. This is expected to facilitate the
expansion of limited or scaled advice both within and
outside of superannuation.
Opt-in and fee
disclosure FoFA Scaled advice
Ban on
conflicted
remuneration
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7. How will the new rules affect your business?
Ban on conflicted remuneration
This reform will see the introduction of a ban on Best interest
conflicted remuneration, including commissions. duty
Opt-in and fee
disclosure FoFA Scaled advice
Ban on
conflicted
remuneration
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8. How will the new rules affect your business?
Opt-in
Advisers will be required to ask their retail clients to Best interest
opt-in, or renew, their advice agreements every two duty
years if clients are paying ongoing fees. This will only
apply to clients who enter new ongoing service
arrangements after 1st July 2013.
Fee Disclosure
Opt-in and fee
disclosure FoFA Scaled advice
From 1 July 2013 Fee
Disclosure Statements will
need to be sent to all clients (new
and existing) where you are charging
ongoing adviser service fees.
Ban on
conflicted
remuneration
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9. How Infocus intends to empower you and your business
to meet FoFA requirements
1.0 Enhancements to Platformplus
You can look forward to a number of enhancements to Platformplus to assist with
the integration of FoFA into your business. The first of these enhancements is
outlined below.
1.1 EasyDealer
1.1.1 What is EasyDealer?
Easydealer is the brokerage management system used by Infocus Wealth Management. Information
from this system has been integrated into Platformplus to capture all the commission and fee revenue
for your clients.
This data will be used in the production of Fee Disclosure Statements. Easy dealer data will sit under
the Client Management Area.
This will also allow easy comparison of revenue with the actual cost of maintaining your clients.
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10. FoFA in practice
This week our conversation revolves around new
obligations for the Fee Disclosure Statement.
Before 1 July 2013 After July
Financial Planners are not obligated to tell clients Financial planners must send an annual
what fees they pay on an ongoing basis outside statement outlining the fees charged and
of an advice document. services provided in the previous 12 months
along with the actual services received. This
must be provided to ALL clients paying ongoing
service fees. Advisers will be in regular contact
with their clients and will need to demonstrate the
value of the services they provide to their clients.
Fee Disclosure Statements must be given to all retail clients who have entered into an ongoing fee
arrangement no later than 30 days after the Fee Disclosure Day. For instance if the fee disclosure day
is 1st July 2014, the notice must be given no later than close of business 30th July 2014.
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11. FoFA in practice
The Fee Disclosure Statement must include:
• the amount of fees paid by the client (in $s);
• the services the client was entitled to receive; and
• and the services that the client has actually received for the period
being reported.
These fees and services MUST reflect a period of 12 months backward from the Fee Disclosure Day.
The level of detail required is that which clearly sets out exactly what services were provided so that
the client is not misled e.g. whether they received personal advice on a particular topic or general
advice.
The obligation to undertake this reporting sits with the adviser (or delegated person) who is the Fee
Recipient on Fee Disclosure Day.
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12. FoFA in practice
When do obligations start?
The Obligation to provide Fee Disclosure Statements starts from 1st July 2013 for all clients (unless a
licensee has opted to start earlier). There is no grandfathering of these obligations.
Is there anything different about how these obligations affect new clients?
The Obligation to provide Fee Disclosure Statements starts from 1st July 2013 for all clients (unless a
licensee has opted to start earlier). There is no grandfathering of these obligations.
How do I determine Fee Disclosure Day for existing clients?
Fee recipients (adviser or delegated person) will need to determine (e.g. by reviewing client files)
when they (or a previous fee recipient under the ongoing fee arrangement) first entered into an
ongoing fee arrangement with each existing client. Depending on the circumstances, this should be
determined in the following order:
1. date the Client Service Agreement was signed,
2. date the Authority to Implement was signed
3. date the adviser service fee was added to the product
4. date the financial product was acquired.
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13. FoFA in practice
What must a Fee Disclosure Statement contain?
The Fee Disclosure Statement must include:
• the amount of fees paid by the client (in $s);
• the services the client was entitled to receive; and
• the services that the client has actually received.
These fees and services MUST reflect a period of 12 months backward from the Fee Disclosure Day.
For Instance, if the Fee Disclosure Day is 30th September 2014, then the time period to be reported
on is 1st October 2013 to 30th September 2014.
If the Ongoing Fee Arrangement has been assigned during the 12 month reporting period covered by
the Fee Disclosure Statement, the Fee Disclosure Statement must include information about the fees
paid to the assignor (previous Fee recipient) and the services received (or entitled to be received) from
the assignor, as well as the fees paid to the current Fee Recipient (i.e. the assignee) and the services
received and entitled to be received from the current Fee Recipient during that 12 month reporting
period.
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14. Definition of terms
Fee Disclosure Statement (FDS) – s962G
A statement in writing provided by a fee recipient to their client about the previous 12 months of their
ongoing fee arrangement, including information about the amount of fees paid by the client, the
services received by the client, and the services that the client was entitled to receive.
Ongoing Fee Arrangement – s962A
An arrangement (includes ALL arrangements however described or structured) that is paid under the
terms of the ongoing arrangement between the client and the representative during a period of more
than 12 months. This can include commission arrangements where they were included as part of the
arrangement but does not include advice or services provided where unrelated services are
separately provided to the same client over a period of more than 12 months.
Specific exemptions include:
1. Insurance premiums
2. Payment plans which meet prescribed criteria
3. Product fees
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15. FoFA definition of terms
Fee Disclosure Day – s962J
This is either the anniversary of the day the arrangement was entered into (Signed ATI / Agreement,
product placement etc) or, where a Fee Disclosure Statement has been provided since then, the day
after the anniversary of the day the FDS was given.
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16. Additional resources
Please find below resources from the treasury website discussing the
overhaul of Financial Advice
The Future of Financial Advice website was set up by the Treasury to discuss the overhaul of
Financial Advice.
http://futureofadvice.treasury.gov.au/content/Content.aspx?doc=faq.htm#_What_are_the_1
In this Newsletter the main Regulatory Guides noted are;
• RG 245 Fee Disclosure Statements
• 175 Licensing Financial Product Advisers - Conduct and Disclosure
• RG 244 Giving information, general advice and scaled advice
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17. What you can look forward to next week
Scaled Advice
Scaled advice is advice provided in relation to a specific area of a client’s needs, for example
insurance. This essentially comes down to the scoping of the advice and the agreement between the
adviser and the client in regards to the area(s) of the advice.
In our next communication we will discuss in more detail this key point.
Any questions?
email us at FoFAConversations@infocus.com.au or contact your BDM.
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