RI Advice – FOFA Training
May 2013
Agenda
•
Introduction: RI FOFA Readiness & Advice Value Chain
•
Annual Fee Disclosure & Opt-in – 1.5 hrs
• Recap of obligations and requirements
• Generating an FDS
• Client engagement re FDS
• Preparation before 1 July & key timing
• Activities x 5
• Questions
•
Morning Tea – 15 mins
•
Best Interests duties – 40 mins
• Recap of obligations
• Changes to advice documents
• Case Studies x 4
•
Conflicted Remuneration – 20 mins
• Recap obligations
• Activities x 3
•
Question & group discussion time – 15 mins
1
RI FOFA Readiness
• RI is well placed to meet FOFA obligations for:
– Annual Disclosure
– Best Interests
– Conflicted Remuneration
• Strong existing advice process focussed on quality advice
• Supported by:
– Templated advice tools
– Customised technology eg Xplan wizards etc
• FOFA will, however, have an impact on your business, especially in regards to additional effort
required to meet Annual Fee Disclosure obligations
2
Advice Value Chain
Disclosure
Best Interests Duty
Ban on Conflicted Remuneration
3
Annual Fee Disclosure & Opt-in
May 2013
Recap of obligations
• Recap of obligations to confirm:
– Requirements
– Definition of Ongoing Fees
– Who should get an FDS (and who doesn’t need to)
– Methods for providing an FDS and timing
– Confirmation of disclosure/anniversary date options
– Process for re-setting disclosure date for new & existing clients
– Buying a book / change in servicing adviser – points to be aware of
5
Fee Disclosure Statement (FDS)

From 1 July 2013, all retail clients with an ongoing fee arrangement for more than 12 months
must be provided with an annual Fee Disclosure Statement

Includes both existing clients and new clients from 1 July 2013

Must include the following information for the previous 12 month period
Outline all services the client was entitled to under their ongoing service agreement or package
Outline the services the client actually received
All Ongoing Service Fees the client actually paid whether paid via the platform product or
directly invoiced
6
Defining Ongoing Fees
 Any fee paid by or at the consent of the client for the provision of services under a written or
implied ongoing service arrangement.
 Adviser service fees (ASF) paid via platform or directly by client are ongoing service fees.
 Generally trail commissions are not required to be disclosed as ongoing fees, however,
ASIC’s regulatory guide on FDSs says fee recipients should be careful to ensure that
wording on the FDS does not mislead clients.
 In situations where commissions have been represented as payment for an ongoing service
arrangement and done so with the clear consent or at the direction of the client, RI
recommends that these payments be disclosed.
Legal source
Commission disclosure required
Ongoing fee definition under FOFA
No
Misleading Representation Regime
Possibly if represented as part of
ongoing service arrangement
ASIC regulatory guide
Disclose if entered into with clear
consent of or at direction of client
7
Who does not need to get an FDS?
 Corporate super members who are not personally advised clients, i.e. the
member has never specifically been engaged by the adviser to deliver personal
advice for a fee;
 Clients only paying insurance premiums;
 Clients only paying trail commissions and no agreement was ever in place
indicating ongoing services were being provided in return for the trail.
8
Providing the FDS
•
How long do you have to provide the FDS to the client?
•
•
Must be provided no later than the end of a 30 day period beginning on the client’s
anniversary date, and
• EG: if arrangement was entered into on 1/5/2013, FDS is due no later than 30/5/2014
Must relate to a period of 12 months that ends no more than 30 days before the statement
is given to the client.
• EG: in example above the FDS should include fee data from 1/5/2013 to 30/4/2014
•
It may be provided at the time of the client’s annual review or separately.
•
Can be provided face-to-face, via post or email
− A paper or electronic copy of the FDS must be retained on the client file.
− If emailed directly to the client’s email address it can be sent without encryption.
−Note - the client must have previously SPECIFICALLY authorised the receipt of
documents by email - holding the client's email address on file or from a fact find is NOT
sufficient.
− If being sent to a non-client such as the Accountant, you will need to encrypt the FDS and in
the subject line you must include the word "Confidential".
9
Disclosure Date
The Disclosure date for the FDS is the anniversary of the date that the ongoing fee
arrangement was entered into.
RI has determined that the disclosure date will be:
 the date of the last review between 1 July 2012 and 30 June 2013; or
 The date the ongoing service agreement was entered into; or
 the date an authority to proceed was signed; or
 Where you have taken all efforts to confirm the date, and this can not be determined, you
can re-set the date (conditions apply).
10
Disclosure Date – Example
A client has an ongoing service arrangement that commences on 1 August 2013
The next disclosure date will be 1 August 2014. The Adviser has up until 30 August 2014 to issue the FDS.
The subsequent disclosure date is 01 August 2015.
30 August
2014
Event
Date
First disclosure day
1 August 2014
First FDS to be given on or before
30 August 2014
Date first FDS is actually given
15 August 2014
Period covered by first FDS
1 August 2013 – 31 July
2014
Second disclosure day
1 August 2015
11
Resetting the Disclosure Date
If it is impossible or unreasonably onerous to determine the day an ongoing fee arrangement
was entered into with the client, ASIC has allowed a “no action” clause where for existing clients an
Adviser can:
 nominate a date between 1 July 2013 and 31 January 2014 as the disclosure day
 provide written notification to the client of the date you have nominated, explaining the
significance of the disclosure day for the purposes of producing an FDS
 provide an FDS to the client within 30 days of this chosen day
The notification and the FDS can be sent at the same time
12
Resetting the Disclosure Date
You may also reset the disclosure date (bring it forward) if:

The current disclosure date is not convenient for the client and they have requested a change;

You wish to spread the volume of FDS production across a number of months, (remember you can always
bring the date forward, however you cannot push it back.)

It is more operationally efficient for your practice to disconnect the FDS dates from your client annual review
dates and issue them in a bulk run once or twice per year.
Resetting a disclosure date effectively brings forward the disclosure day to a period earlier than the client’s
original disclosure date.
When resetting, please note the following:

You must still issue an FDS for the period of the 12 months up to the new disclosure date.

Resetting FDS must also include disclaimers to clarify to the client that you are resetting the date. This can be
done by selecting one of the appropriate paragraphs in the FDS template. The reset must be appropriately
documented.
.Where resetting the FDS, remember to amend this date in your client management system (Xplan).
13
Resetting the disclosure date for a group of clients - Exercise
In the simplistic example above, you have 5 clients due for review in the month of July 2013. The
identified client anniversary dates are the 8th, 14th, 23RD and 27th July.
Whilst we recommend fee discussion are carried out in a review meeting, the practice has made a
Bus. Decision to send out the FDS and would like to streamline this process for the back-office.
Questions:
1) Looking at your clients in July, can you reset the 4 clients to September 2013?
No, you can only push these clients forward, not back.
2) If you were looking at creating the simplest process for your practice, what date would you
re-set the FDS anniversary date of these four clients?
To maximise process and provide a single FDS date in July, bring it forward to 1 July. This
gives you to 30 July to disclose the FDS
3) What would be the reporting period that this FDS would cover? 1 July 2012 – 30 June 2013
14
Buying Client Books
•
Servicing Adviser obliged to produce an FDS as at the disclosure date
•
FDS must cover the 12 months until disclosure day. This must include ongoing fees paid by
the client to the previous adviser or licensee (where this situation arises).
Enhanced due diligence – Before you buy
When purchasing a book of clients your due diligence processes must consider:
• if the old ongoing service arrangements under the previous adviser are continuing?; or
• are you going to establish a new service arrangement; and
• are you able to determine the client’s disclosure dates, services entitled to, services
received and ongoing fees over the 12 months up to their disclosure date?
•
You should ensure the previous adviser can supply you with the information you need. If
you are unable to receive this information you may be forced to establish new
arrangements or terminate ongoing fees.
•
You may also be buying “additional workload for your resources” if disclosure dates for a
large number of clients are close together.
15
Buying Client Books
For pre - 1 July 2013 Clients
• If you are missing the information you need to send your client an FDS, you must have made a
reasonable effort to obtain the information from the previous adviser and /or their licensee. You
must keep evidence of having made reasonable efforts including keeping file notes and emails
of your attempts on the client file.
• If after having made reasonable efforts, you are unable to obtain the information for the full 12
months to the disclosure date, you can issue an FDS with the partial information you were able to
obtain.
• For existing clients as at 1 July 2013, ASIC will not take action against you if the FDS has
incomplete information from the previous adviser / licensee.
For post - 1 July 2013 Clients
• For new clients from 1 July 2013, if you are unable to obtain the information you need after the
reasonable attempts, you must establish immediately a new ongoing fee arrangement with your
client.
16
Generating an FDS
May 2013
Fee Disclosure Statement (FDS) generation
• RI solution links in to existing systems and processes ie:
– DMS Online
– Xplan
– RI best practice review process and ongoing service model
• Disclosing amount paid to the adviser
– may vary from amount client paid due to product rebates (RITC, ETR etc) so
caveats/disclosure required to make clear for clients
• Solution enables you will meet minimum requirements
18
FDS Generation – overview of automated solution
1
FDS Generation – overview of process
Ensure all client details
are in Xplan
Review records in
DMS Online
Enter client details into
Xplan:
•Anniversary date
•Service category /
segment
Consider doing a trial run
FDS to determine what
data gaps there are
Xplan
DMS Online
Xplan / CommPay
Xplan
20
FDS Generation – Automated Solution: Overview of process
Xplan
Enter new client details
into Xplan

Picks up groupings from
DMS & matches to Xplan.
Creates an exception report
if can’t match

New
New


New
New
21
FDS Generation: Automated Solution – changes to existing process
• Continue with existing process ie DMS Online groupings, Manage Review & Client Segmentation
processes in Xplan
• New processes:
– Client matching (of exceptions) in CommPay to ensure correct fee data flows through to Xplan
– New disclosure-related fields in Xplan:
– “Disclosure Statement Required” – start using this field to identify clients in Xplan who need
an FDS
– “Next Disclosure Statement Date” field – start using that for all new clients with ongoing
service arrangement (in addition to “Review date” field)
– Note: RI is working to provide bulk upload of Review Dates into this field for existing clients
– Reconciliation of services received by client with services entitled to in Xplan
– FDS generation in XPlan
22
FDS Generation – Automated solution – client matching
FDS Generation – Automated solution – client matching
FDS Generation – Automated solution – client matching
FDS Generation – Automated solution – client matching in CommPay
Go to the CommPay via the Xplan Dashboard
Click on Administration Functions > CommPay
26
FDS Generation – Automated solution – client matching in CommPay
Mapping a CommPay client to an Xplan client using their name search
• Note: mapping can also be done using the Xplan client entity number
View CommPay client name
& Xplan Clients
Tick clients you want to
link and select “Match”
27
FDS Generation: Setting up Services & Fees for Ongoing Arrangements
Go to: Xplan > Client Service to enter “Services Entitled To” & Fees in relation to Ongoing Service Agreements
28
FDS Generation: Automated Solution – important Xplan fields
Go to: Service – Reviews
Identify who needs an FDS in DMS Online and
record this in Xplan here
Use this field for your Annual Disclosure Date for
all clients.
Note: For existing clients we will retrofit this field
for you from Review Date field
Opt-in date: enter date
of agreement into this
field for new clients post
1 July 2013
29
FDS Generation: Automated Solution – Search criteria
Go to: Xplan > Search
Use this to find all clients with Annual Disclosure date in certain month
For example:
search for all
clients with “Next
Disclosure date” in
month of Oct
Results: Shows all
clients with FDS
due in Oct
30
FDS Generation: Automated Solution – FDS Management Report
Use this to see a summary report on clients requiring an FDS
You can run an FDS
Management Report
Results: Shows
summary of status
re Services for FDS
clients
31
FDS Generation: FDS Wizard – Disclosing Services
Go to: Client Menu / Service / FDS Wizard
Select letter options
Confirm if resetting
disclosure date
Tool tips
provided to
explain steps
Services Entitled to:
Automatically ticked in
line with ongoing
service arrangements
Services Provided:
Tick to confirm what
was provided to client
Free-text field if you
need to explain / clarity
anything re services &
what was provided
32
FDS Generation: FDS Wizard – Disclosing Fees
Go to: Client Menu / Service / FDS Wizard
Select CommPay as
source of fee data*
This screen also shows Fees as
per Ongoing Service Agreement
so you can quickly reconcile
Choose what fees you are disclosing here ie:
•ASF only
•ASF & Commissions separately
•Total fees (only use if not able to
unbundle from product manufacturer
Breakdown of fee data provided
here
* Note: option available to input fee data manually if required
33
FDS Generation: FDS Wizard – Generate FDS
Click generate FDS
Download FDS
34
What does the FDS look like?
Cover letter
Statement (linked to OGS agreement wording)
Services “entitled to”
Services “provided”
Fees charged
Important disclaimer info:
• “Services provided” may include services that were made available to you
or you had access to, which you did not utilise – allows you to tick where
access was given but client didn’t take up service eg didn’t attend seminar
• In addition to fees disclosed other ongoing remuneration such as
commissions may also be received – important sentence to cover off any
perception of misleading & deceptive conduct when only disclosing ASFs
35
FDS Generation – Manual solution
In certain situations you may choose to generate an FDS manually ie not using CommPay fee data,
eg if:
• Unable to complete client matching of exceptions prior to disclosure date, which means fee
data via CommPay may not be correct
• Unable to reconcile fee data from CommPay with amount you believe client should have paid
and you prefer to enter the amount in manually
• You have a fixed dollar-based ASF you charge your clients, which means you know easily how
much they have paid (eg $100 per month for 12 months)
X
Run DMS Reports and collate total fees
for client relating to ongoing service
arrangements
Xplan
Manually enter fee
amount into Xplan
36
FDS Generation – Manual solution
Go to: Client Menu / Service / FDS Wizard
Select Manual as
source of fee data*
Manually enter fee
37
Client engagement re FDS
Ultimately your clients are paying you because they trust you
U.S Based consultant, Charles Green* defines trust as:
Credibility + Reliability + Intimacy
Self-Orientation
How do you rate
yourself on the trust
scale?
•
•
•
•
Credibility (i.e. competence, track record & ability to instil confidence)
Reliability (i.e. do you deliver on what you say you will deliver – service and advice outcomes)
Intimacy (i.e. how well do you engage with your clients on a personal level?)
Self-Orientation (i.e. to what extent are you putting their interests before your?)
*Article: Trust in Business: The Core Concepts April 29 2007
38
Client engagement re FDS
• In order to ensure the FDS does not potentially create issues with your clients, you need to
understand the difference between your value and service proposition.
• CVP – This really needs to focus on the outcomes – The benefits to the client in having a
relationship with you.
• CSP - This is the mechanism which provides structure to help you deliver on your value
proposition.
• When discussing your FDS, focus on value, not on the individual service widgets which you may
or may not have delivered.... how much value does a newsletter really provide?
• RI have developed a Sales Script and re-worded a new master service agreement to help.
• Speak to your RPM if you would like to revisit your value or service proposition
39
Annual disclosure – best practice timeframes
New client
signs up for
ongoing
service
program
Anniversary date
(date ongoing
agreement
commenced i.e.
review or ATP signed)
e.g. 1 July 2013
Send out
review offer
letter/email/
phone-call
4 weeks
prior
however
may vary
dependant
on your
review
process
When looking & value vs. fees, we
recommend you make the process part of
your review process (i.e. face to face)
Conduct Annual
Review meeting
& provide client
with Annual
statement of
services & fees
for 12 mth period
ending 30 June
2014
First FD day
– eg.1 July
2014
If face-to-face
meeting not
possible, send
out Annual
statement
(by post/email)
Annual
disclosure
deadline
expires –
penalties apply
past this date
12 months +
30 days
eg 30 July
2014
Obligation
met
40
Preparation for 1 July

Commence client matching (of exceptions) in CommPay – access scheduled for late May

FDS template will be available from mid June 2013

Training material and online tutorials in May and June.

Refer to RI Report for FOFA updates

Contact your RPM or practice Development Coach to assist you through the process.
41
Annual Disclosure – New support tools
• New letter templates are being developed:
– Cessation of client relationship
– Confirmation of services
– Re-engagement to confirm changes to service offer and/or price
– Letter to request data from adviser or licensee of a practice being purchased
– Update to FDS statement for partial disclosure
• To be released via RI Report in June
42
Key milestones and timeframes
CommPay*
access enabled.
Start client
matching
FDS wizard
released
in Xplan*
National
Conference
1 Mar
3-5 April
FOFA
starts
1 May Late May1 June 17 June
PD Days
Reinforce solutions &
processes
1 July 2013
July
FDS Testing
Identify who needs FDS
Group clients in DMS
Clear segmentation & service offers in Xplan
Anniversary date identified for all OGS clients
FOFA
Training
via RBTs
Start
booking
reviews &
preparing
for July
clients
Monitoring &
supervision starts
C&D client review & clean up
* Release schedule TBC as dependant on Technology suppliers.
6
Activities & Question Time
May 2013
Activity 1 – FDS
The Adviser has inherited a client that has an ongoing service arrangement that commenced in 2010.
The Adviser Service Fee (ASF) is $2,200 per year and is deducted monthly from an
Investment Account.
What would be an the most relevant disclosure date?
The date of the new
ongoing fee arrangement
I have implemented
Answer:
As a “new” ongoing fee arrangement has been structured, the second option
would be the most relevant disclosure date.
45
Activity 2 – FDS
An Adviser has purchased a new book of clients from another adviser and has had the servicing rights to
their Macquarie Wrap super account changed to you.
On the disclosure date your records show the client paid you an Adviser Service Fee of $2,000 for the past
5 months but the previous adviser and their licensee says they are unable to release data for the prior 7
months to you.
What should you do?
Answer:
Issue the FDS with fees paid for the 5 month period with clear disclosures
indicating this. All future FDS’s will need to cover the 12 month period.
46
Activity 3 – FDS
The client agreed to a “Platinum” Service package in 2010.
As part of this, they are entitled to two reviews annually, newsletters, invitations to seminars and any phone
queries they initiate. They attended one review but declined the second as they didn’t feel the need to
review or make any changes.
What must be included in the FDS?
Answer:
Outline the services entitled to receive, the services they actually did receive and the ongoing fees paid.
In this example, if the service agreement is for the adviser to “offer” a review, and the client doesn’t take
this up, the adviser has still met its obligation.
The FDS wizard/template does allow you to articulate this.
Note – the wording of your ongoing service agreement is important.
47
Activity 4 – FDS
An Adviser is planning the schedule of FDS due dates for the year ahead. The Adviser
identifies that 30 of the clients are due for an FDS by 31 July 2013.
 22 of these clients pay less than $100 in ongoing fees to the business
 5 clients generate $2000 in revenue per annum
 3 clients are top tier clients
The Adviser will not have the resources or time to complete all 30 statements by the due
date.
What could be a solution?
Answer:
Turn off the fees for the 22 clients and ensure you deliver on your top tier clients.
Look to re-engage with the 22 clients to engage into a profitable new service arrangement.
48
Activity 5 - FDS
• You have 10 clients who have been on an ongoing service package for the past 6 years.
• The ongoing service entitles them to 1 annual review per annum. You agreed with one of the
clients that the cost of the ongoing service package is $1,000 per year and you arrange with the
client to pay $400 via an Adviser Service Fee with the remaining $600 being paid via trail
commission from the product.
• At disclosure date, what should be included in the FDS?
Answer:
As you have made representations and agreed with the client that the ongoing
service fee is to be paid from the ASF and commission, both the trail and
commission should be included.
49
Best Interests Duty
May 2013
What’s changed
From 1 July 2013 – reasonable basis – replaced by Best Interests Duty
The Law:

places the liability on you personally as the advice giver (previously on the Licensee)
 details specific steps (Safe Harbour) that must be undertaken throughout the advice process
 states - The client’s needs and interests must be placed ahead of your own or RI’s or
associated entities (there was no statutory duty in the past)
 Penalties for breaching obligations are civil (previously criminal) (Note: ASIC has other
powers that it may apply resulting in criminal action being taken)
 Penalties $200,000 adviser
 $1 million for licensee (potential for criminal action under other ASIC powers)
Best Interests Duty – considerations
 Any advice given to a client must recommend a strategy that is appropriate for the client and
satisfy the best interests duty and related obligations.
 Is the client in a better position than they were before they sought it?
 Being better off is tested at the time the advice was given
 Evaluation will be assessed on whether a reasonable adviser presented with the
information that you had at the time of the advice, would consider that the client would
be better off if they followed your advice
52
Safe Harbour
Step 1
Step 2
Step 3
• Identify your client’s objectives
• Identify the scope with your client
• Make reasonable efforts to obtain complete and accurate information
• Assess whether you have the expertise required to provide the advice. If you don’t,
Step 4 refer or decline to provide the advice
• Where you make a financial product recommendation you must demonstrate that you
have completed a reasonable investigation to ensure that the recommended product
Step 5 meets your client’s financial goals & objectives
Step 6
Step 7
• Base all judgement on the client’s relevant circumstances
• Take any other reasonable necessary steps to ensure your advice and product
recommendations are in the ‘best interests’ of your client
Most RI Advisers are already doing this and generally will have little change to make.
The focus should be on ensuring you have a
robust, defendable and well documented advice process.
53
Scoping your advice
 Assess if you have the expertise to provide advice given the agreed scope and complexity of
the needs and circumstances of the client.
 Establish the scope of advice most appropriate to the client’s needs, objectives and
circumstances;
 Consider your authorisation and experience including your strengths / development areas in
advice;
 With the client’s best interests at heart, determine if you can proceed to provide advice on the
agreed scope or have to decline to provide advice or refer the client
 You must not limit the scope of advice inappropriately to your areas of qualification or
experience
Referring to another adviser
 You must decline to provide advice if you do not have the expertise to
give advice in the areas the client requires advice.
 Best practice would be to source a qualified adviser from within the RI network
or refer the client to a referral partner
 Identify potential gaps in your advice offerings where you may need to
establish a referral arrangement with another professional (lawyers,
accountants, other advisers);
55
Advice records
Under the Best Interests Duty, having documentation to prove a defendable and a robust advice
process was used becomes as critical as ever.
Keeping comprehensive records on client files including research and documenting why the
advice was appropriate for your client, remains a critical compliance requirement.
Some examples of appropriate documentation to support your advice process are:
 Detailed file notes
 Any correspondence between you and your client or between you and the product
providers when conducting your research or reasonable investigation
 Working papers
 Fact finds
 Advice documents
 Recordings
 Any other supporting documentation that you feel is relevant.
56
Changes to Advice Documents
FSG & Adviser Profile
• Incorporates the Best interests obligations and the process to refer clients where an Adviser may have
limitations in the advice they provide.
• Includes updated info in regards to conflicted remuneration
Fact Find - Key changes:
• Purpose for seeking advice section – new free text section for capturing why client seeking advice
• Wording in needs & objectives table has been changed to better reflect client needs
• Goals, needs & objectives section – now includes free text section to capture client’s actual words
• Goals, needs & objectives section - Advice limitations – new section for recording any limitations
• LOE – no longer includes scope of advice as it’s not a requirement to include in the LOE
• Authority to provide information – new page added to enable collection of client authority
Letter of Engagement
• Standalone version of LOE with exactly same wording as current LOE.
• Provided as standalone version via Xplan merge report as scope of advice has been removed from version of
LOE contained in Fact Find.
57
Changes to Advice Documents
Quick Plans - Key changes:
• Scope of advice section – updated wording to describe what’s in scope
• Inaccurate / incomplete information warning added
• ‘What you want to achieve’ section – text updated to create better linkage between strategy & objectives sections
RoA & RoA File Note
• Intro letter updated with better wording re scope of advice & incomplete / inaccurate info
SoA & Strategic Review SOA – Key changes:
• Scope of this advice section – text updated to match new scope items in Fact Find (which better reflect client needs & issues)
• Limitations text – added for when client hasn’t provided required info
• Objectives text amended to match new scope items and priority column added
• Overall text updated to ensure linkage between why strategy is right for client and meets their objectives
• New sentences added linking product to strategy
• Objectives text amended to match new scope items
Ongoing Service Agreement 
• Wording improved to provide greater clarity around services (for future use in FDS) and to ensure focus is on Core Services
provided by Adviser, rather than ancillary services
58
Best Interests Checklist – new tool
Complete this checklist to help you meet your best interests duty and related obligations.
Tick the applicable boxes and retain all applicable supporting information in the client file to show how you have met your obligations.
Client name(s): ………………………………

1.Goals and objectives *
I identified and recorded the client’s objectives, financial situation and needs stated by the client

2.Advice area (the subject matter of the advice) and the scope of advice*

I identified and recorded the advice area sought by the client, either stated or implied *

If the advice area has been limited by the client or by me, I recorded by whom and why #

I identified and recorded the scope of advice that is consistent with the advice area sought by the client and the client’s circumstances *

3.Client information *
I made reasonable inquiries to obtain complete and accurate information about the client’s circumstances and recorded the information *

4.Expertise and referral *

I have the expertise and accreditation to advise the client on the advice area and products, and I am authorised by my licensee to do so #

I referred the client to another adviser who had the expertise to provide the advice #

I declined to provide advice as I did not have the expertise to provide it #
59
Best Interests Checklist – cont...

5.Investigating and recommending a financial product #
* This step is mandatory when recommending acquiring a new financial product, or disposing of, increasing or switching a holding in an existing
financial product. Tick the relevant boxes only

I formulated and recorded the strategy on which the advice was based before I investigated financial products #

I investigated approved financial products that might meet the client’s needs and achieve their objectives, and recorded the findings #

Where approved financial products did not meet the client’s needs, I investigated non-approved financial products that might meet the client’s needs
and achieve their objectives, and recorded the findings #

I investigated a financial product that the client requested that I consider and recorded the findings #

I assessed the product information gathered and recorded the details #

I provided the client with general or strategic advice that was not product specific #

I obtained a waiver/approval to use a non-approved product and/or platform #

6.Judgements *

All judgements I made were based on the client’s relevant circumstances. I considered them when scoping the advice, determining the extent of my
inquiries into the client’s circumstances, formulating the strategy and recommending the type of and the specific financial product *

I believe the client is likely to be in a better position if the client follows the advice *

7.Other reasonable steps *
I took other reasonable steps that, at the time, I regarded as being in the best interests of the client and recorded the details *

8.Appropriate advice *
The advice is appropriate to the client *

9.Prioritising the client’s interests ahead of my own *
I prioritised the client’s interests ahead of my own interests, my related parties and those of my licensee *
60
Best Interests Duty 1 July 2013
 Destroy all old stock
 Fact Find
 FSG & Adviser Profile
 Use all new advice documents (in Xplan and on Adviser Services)
 Fact Finds
 Letter of Engagement
 Quick Plans
 Record of Advice templates
 Statement of Advice templates
 Strategic Review SOA
 Best Interests file checklist – new tool
61
Key milestones and timeframes
CommPay*
access enabled.FDS wizard
Start client released
in Xplan*
mapping
New
Advice docs
released
National
Conference
1 Mar
3-5 April
FOFA
starts
1 May Late May
Mid June
PD Days
Reinforce solutions &
processes
30 1 July
June
July
FDS Testing
Identify who needs FDS
Group clients in DMS
Clear segmentation & service offers in Xplan
Anniversary date identified for all OGS clients
FOFA
Training
via RBTs
Start
booking
reviews &
preparing
for July
clients
Monitoring &
supervision starts
C&D client review & clean up
* Release schedule TBC as dependant on Technology suppliers.
6
Case Study 1 – Replacing a Product
Situation: A client has requested an increase of $100,000 to their current AMP life cover and TPD sums
insured of $300,000 as their mortgage has increased by this amount.
Recommendation:
You recommend the client obtain a new policy for $400,000 and cancel their existing policy, rather than apply
for additional cover within the existing policy.
The terms of the insurance policies and the annual premiums are the same.
Result for you: This entitles you to receive a commission of 120% of the annual premium of the entire
$400,000 rather than just the increased amount of $100,000.
The client accepts the advice and now requires medical checks which would not have been required if the
cover had been increased on the existing policy under AMP . No loadings are applied to the client. If the
client had held the existing policy, and with the increase they would have been entitled to a 5% increase in the
level of cover at no extra cost due to them reaching the four year anniversary on the policy.
Has the client been placed in a better position?
Who has benefited from this advice?
The client is in a better position in the sense
that they now have more appropriate levels of
cover, however assuming that the policy
definitions & terms are the same, they could be
worst off compared to increasing cover under
existing policy. The adviser has put their interest
first.
63
Case Study 2 – Qualifications & Advice
Situation - You are a new Adviser that has a life risk only authority. You recently saw a new client who is a
self-employed tradesman who requires income protection cover before he’ll be allowed on a building site.
Discovery - You conduct reasonable enquiries in relation to the agreed scope of advice and during the Fact
Find process discover the client is in partnership operating a hugely successful plumbing business with 20
employees. The client spends his time quoting jobs while his partner runs the logistics and admin. The client
also tells you that he does not have any succession plans in place.
Recommendation - You consider the clients may have a need for a Buy/Sell Agreement and Business
Insurance however as a newly qualified adviser, you don’t feel you have enough experience to provide advice in
the additional areas identified.
What are your obligations under Best Interests?
As the client has highlighted areas outside the area of competency, you must either decline to
provide the advice or refer the client to an appropriately qualified specialist (e.g. another RI
adviser). You can not ignore the clients need or mutually agree to scope it out.
64
Case Study 3 – Scope of Advice
Situation - A couple engages your services to provide them with advice to address three objectives:
 to pay off their home loan;
 to obtain education funding strategies for the expected educational expenses of two children; and
 to increase their superannuation balance.
Discovery - In the Fact Finding process you discover that they have a third child who has a disability and
will require ongoing care for their entire life. You expand your questions to discover what plans have been
made to care for the child in the short and long term.
Recommendation - The couple provides further information of the investment and insurances that have
already been instigated to care for their third child. The client states that this investment does not need
to be reviewed. However you discuss the need to review the insurances. The client agrees with this
review.
How should you address the additional investments and insurances under Best
Interests?
The adviser has considered that the information provided was not sufficient to identify the clients
relevant circumstances. The adviser uses a series of questions to determine if the client has made
provisions for the child & to determine if the needs & objectives as well as the scope of advice should
be amended. This demonstrates that the adviser is considering the scope of advice in relation to the
clients best interests. Also it is considered that advisers who implement these types of processes are
more likely to be able to demonstrate that they have met the BI duty & related obligations when they
provide advice.
65
Case Study 4 – Scaled Advice
Situation - A 45 year old client has approached you wanting to consolidate super and review their risk
position. It appears that this will be a simple scaled advice situation on the surface and you agree and
begin the fact find process.
Discovery - During the fact find process, you find out the client is divorced from a partner who cannot
work and supports a disabled child.
It is now clear to you this is not as simple as it first seemed. You are now aware that the client is the
sole breadwinner and that you must ask more questions about what extra financial support the
disabled child needs as a result of their medical condition. This includes such things as medical fees,
adjustments to home or car and extra tools to assist the child through life at school or special
education etc.
How should you address the additional investments and insurances under Best
Interests?
The scenario requires you to make further enquiries because under the safe harbour requirements you
must:
- Identify the needs of the client that would be considered as relevant to the advice sought; and
- Where it is reasonably apparent that information in relation to the client is incomplete, you must make
reasonable enquiries to obtain all the information.
As the provider of the advice with the expertise, it is your responsibility to know how far your enquiries
should go, thereby setting the scale of the advice. You can adjust the level of your inquiries about the clients
relevant circumstances to reflect the nature of the advice being provided as demonstrated in the example
above.
66
Conflicted Remuneration
May 2013
Conflicted remuneration – recap of obligations
The ban on conflicted remuneration is comprehensive and affects the following types of payments:
 Fund manager to Platform payments (shelf space)
 Product manufacturer to licensee payments
 What advisers can accept from their licensee and from product manufacturers
 Monetary
 Soft-dollar benefits
 Payments from employers to advice giving employees
 Charging clients asset based fees on borrowed amounts
68
What is conflicted remuneration?
• Conflicted remunerations means any benefit, whether monetary or non-monetary, given to
financial services licensee, or a representative of a financial services licensee, who provides
financial product advice to persons as retail clients that, because of the nature of the benefit or
the circumstances in which it is given could reasonably be expected to influence the financial
product advice recommended by the licensee or representative to retail clients
69
Ban on conflicted remuneration structures –
Superannuation, investments and platforms
•
A prospective ban, from 1 July 2013, on:
– All benefits from any financial services business, relating to the distribution and provision
of advice for retail financial products
– Includes a ban on initial and ongoing commission
– Benefits include monetary and non monetary benefits
– Grandfathering provisions for existing clients
– Existing clients in existing products are generally grandfathered
•
Ban applies to all financial products (including managed investments, superannuation and
margin loans) but excludes certain risk insurance products
Conflicted remuneration
Note: Monetary benefits
from Life companies are
exempt
71
Ban on conflicted remuneration
• Excludes:
– ASFs directed by a client
– Payments in relation to general insurance
– Payments in relation to life insurance, other than:
– Group life insurance within superannuation
– Any life insurance for a member of a default super fund
– Payments where no advice is provided
– Payments in respect of wholesale clients
– Payments in respect of certain stockbroking activities
– Prescribed benefits or given in prescribed circumstances
Is the benefit conflicted?
In order to assess whether a benefit is conflicted you need to answer the following questions:
•
•
•
•
Is the benefit designed / intended / reasonably capable of influencing the advice given?
Is the benefit specifically exempt from the definition of conflicted?
If the benefit is conflicted, has the benefit been grandfathered?
If the benefit is allowed to be accepted, how do I disclose it?
In assessing whether it is conflicted it is important to consider:
• What the benefit is in nature (is it monetary or non-monetary? If non-monetary, is it
educational, IT or entertainment?). Is it designed to align your interests to your client’s?
• What is the benefit designed to reward? (Product recommendations, volume linked sales,
activity/sales, non-product linked measures?)
• Is it volume based? (linked to volume of product sold? – if so it is presumed conflicted)
• Are the benefits passed on to advisers who provide advice to retail clients?
73
Grandfathering of existing arrangements
• FOFA grandfathers existing arrangements for existing members in an existing fund or investment
(and some new member)
– Grandfathering of any arrangement that was entered into before 1 July 2013; and
– where a person was a member of the fund, and investor or had given a direction prior to 1 July
2014.
Establish new arrangements until 30 June 2013*
No new arrangements will be grandfathered
Continue to on-board new clients into pre 1 July 2013 arrangements
No new clients grandfathered
Continue to receive commissions and rebates on grandfathered client balances and additional monies
Continue to receive commissions and rebates on switches & top-ups within existing pre 1 July 2013 arrangements
An arrangement has potentially broad meaning
Applies to platform & non-platform operators
30 June 2013
30 June 2014
* Subject to anti avoidance provisions.
74
Grandfathering of existing arrangements
•
FoFA grandfathers existing arrangements for existing members in an existing fund or
investment (and some new members)
– Grandfathering of any arrangement that was entered into before 1 July 2013
– Where a person was a member of the fund, and investor or had given a direction prior to 1
July 2014
– An “arrangement” has a potentially broad meaning – it may encompass contracts,
agreements, understandings, schemes or other arrangements
– A “benefit” includes:
– Commissions
– Shelf-space payments
– Platform margin
– Soft-dollar benefits
– These measures now apply in relation to both platform and non-platform operators
Grandfathering of existing arrangements
•
̵
Existing client in existing fund/investment
•
Grandfathered
̵
New contributions to existing fund/investment
•
Grandfathered
Switch within existing fund/investment
Grandfathering for super, pension and IDPS
̵
“Limited” grandfathering for non-super mastertrusts
•
̵
̵
Transfer to a new fund/investment/platform
Not grandfathered
Monetary Benefits
Benefit
From
To
Conflicted
Comments
Adviser Service Fees
oAsset based fees (other than where
investment is sourced from borrowing)
oFixed fees
oFlat SOA / ROA fees
ohourly rates as agreed by you and your
client.
Adviser Service Fees
oAsset based fees (where investment is
sourced from borrowing)
Ongoing commissions (super and
investments)
Client
Adviser
No
Fees paid for by client to adviser align the
adviser to the client and are not conflicted.
You can accept these and disclose them in
the SOA / ROA.
Client
Adviser
Yes
Specifically banned. You cannot charge a
client this after 1 July 2013.
Product via
Licensee
Adviser
Yes but
Grandfather
ed
Life insurance commission held both inside
& outside of superannuation.
Product via
Licensee
Adviser
Exempt
Volume rebates
Platform via
Licensee
Adviser
Yes
You can continue to receive these and
disclose them in the SOA / ROA. (Please
note however Stronger Super legislation will
impact on commissions from default funds)
Life insurance commission held both inside &
outside of superannuation will continue to be
paid (except for group cover inside super or
retail in default funds and Mysuper funds)
You can continue to receive these and
disclose them in the SOA / ROA.
(Note Stronger Super legislation will impact
commissions from a default fund).
Grandfathering may apply to existing pre 1
July 2013 arrangements.
Grandfathering does not apply to new
arrangements post 1 July 2013.
Shelf space fees
Fund manager Licensee and /
or Adviser
Licensee
Adviser
Purchase of practice
Yes
Banned (subject to grandfathering of certain
arrangements pre 1 July 2013)
No
Allowed as long as there is no uplift in
valuation for specific products / platform
77
Monetary Benefits cont...
Benefit
From
To
You recommend OneCare Income
Protection to a client after 1 July and
receive 115% upfront commission.
Product
Manufacturer via
Licensee
Adviser
You have a client with an AMP Super
Product
Account – not in a default investment
Manufacturer via
choice - that has been active with you
Licensee
as their Adviser since 2008. You
receive a monthly commission payment
of 0.6%pa.
You purchase a client book with 100
clients who were with an adviser for
many years as at 1 July 2013. The
book was bought on 10 July 2013. The
previous Adviser was receiving ongoing
commission of 0.8% on super and
investments.
You have a large Corporate Super
account as a client. You currently
receive a trail commission which has
been in place for the past 5 years.
Conflicted
Comments
Exempted
Life insurance commissions are
specifically exempt and you can continue
to receive them. Disclose these in the
SOA.
Adviser
Grandfathered
Grandfathering may apply to existing pre
1 July 2013 arrangements
Product
Manufacturer via
Licensee
Adviser
Grandfathered
Product
Manufacturer via
Licensee
Adviser
Grandfathered
The existing client arrangements as at 1
July 2013 can be assigned / transferred to
a new adviser subject to same
arrangements being in place with both
licensees. However you should seek
legal advice on how the sale contracts are
structured.
This is grandfathered however note the
impact of Stronger Super legislation on
default funds.
You agree with a client to charge a one- Client
off ASF of $1,100 for the cost of your
advice commencing July 2013.
Adviser
No
Client payments to advisers align your
interests with the client. This is what the
legislation is intended to do. This can be
accepted and is disclosed in the SOA /
ROA.
78
Non-monetary benefits
• Benefits where a payment does not occur between two parties are non-monetary.
• Non-monetary benefits are sometimes referred to as soft dollar benefits.
• A non-monetary benefit can be allowed if it is not capable or reasonably capable of influencing the advice
given to a retail client.
• If non-monetary benefits are deemed to be conflicted remuneration, then a ban applies on amounts greater
than $300.
• This applies to both benefits given from life insurance providers as well as non-life insurance providers.
• For soft-dollar benefits <$100 you do not have to record them
• For soft-dollar benefits >$100 up to $300 you must record this in your alternative remuneration register.
• For benefits >$300 you cannot accept these
79
Non-monetary benefits
Frequency of benefits
• Note that the benefits above may be regular or frequently given (more than 3 times over a 12 month period).
• If benefits are similar in nature (e.g. 4 dinners provided by a product manufacturer to an adviser within 12
months) they may be treated as related and all 4 dinners added as one benefit to see if they exceed the total
$300.
• If benefits are unrelated / once-off then each individual benefit can be up to $300.
Non-monetary exemption
• Benefits with an educational or training purpose – not conflicted if it has a genuine educational or training
purpose that is relevant to providing financial product advice. The benefit must:
– Take up at least the lesser of 6 hours a day or 75% of the time spent on the course; &
– The participant or their employer or AFS licensee must pay for travel and accommodation relating to the
course, and events and functions held in conjunction with the course.
• Benefits for IT & Support – not conflicted if it is for the provision of IT software and support, and the benefit is
related to providing financial product advice about the products issued or sold by the benefit provider; and
complies with the conditions in the regulations. The benefit must:
– be provided by the owner or distributer of the software;
– access to an IT “help desk” for problems that an AFS licensee or representative experiences in using admin
platform software where the benefit is provided by the software owner or distributer; and
– access to a website to place client orders.
80
Non-monetary benefits
Benefit – includes following examples (but not limited to)
Free or subsidised business equipment (Computers and other hardware, software, IT support (e.g. accounting,
anti-virus and software) and stationery)
Hospitality (Tickets to sporting events or concerts and subsidised travel)
Lunches and dinners provided / entertainment
Free use of conference facilities, training rooms for advisers
Arranging of loans to other licensees or representatives
Attendance at networking events (Conference) domestic and overseas.
Provision of marketing services (brochures, newsletters, promotional documents)
Promotions or other ways of recognising an employee based on product recommendations / sales
81
Do you employ advisers?
Employers have specific obligations to ensure they do not provide conflicted remuneration payments to their
employees who give advice to retail clients after 1 July 2013.
Employers should consider the following questions.

Do you employ advice giving employees?

Do you reward employees based on the total amount of $FUA implemented or Specific Product volumes
recommended?

Do you have long term incentive programs in place where rewards are calculated based on the volume of
products implemented?

Have you sought HR legal advice on which measures may be conflicted?

Have you sought HR legal advice on how to restructure contracts / scorecards before 30 June 2013?
82
Employees – Salary vs Bonuses
Fixed Salary
Salary payments and SGC are not conflicted remuneration, however, if you attach any conditions to them based
on the amount of product sold or volume of funds implemented, they can influence the advice and can be
conflicted.
Variable benefits (bonuses, rewards and recognition)






Bonuses
Share of Revenue
Criteria for promotion and salary increases
attendance at networking and entertainment events
reward-focused conferences
Long term incentives such as shares or options in the business
Care needs to be taken on how these benefits are calculated and how closely they are linked to the volume of
product implemented or advice given.
Generally an adviser’s contribution to the total revenue or net profit (regardless of product recommended) to your
business or division will be less likely to be conflicted than an adviser’s scorecard being linked directly to $FUA
implemented.
83
Rewarding Employees
When rewarding the Adviser, consider other criteria in addition to revenue generated
 Meeting employer compliance policies – an “outstanding compliance rating”
 High levels of client satisfaction
 Client retention
 The number of new clients the employee has brought to the business
 Professional development achievement
 Team and corporate value
84
Performance Based Bonuses
Issues to consider when evaluating performance benefits
Purpose of the Performance Benefit
Consider the behaviour you are trying to encourage through the benefit.
For example is the scorecard criteria designed to encourage best
interests advice.
Link between the benefit & financial product
advice
How direct is the link between the benefit and the value/number of
financial products recommended to clients? It is likely to be conflicted if
based on the volume of product sales compared to one based on the
profitability of an employee’s business unit.
Involvement of the recipient in the advice giving
process
How directly involved is the recipient? If the recipient helps prepare the
advice but does not provide input into the recommendations made to
the client, the performance benefit is less likely to be conflicted.
Environment in which the benefit is given
Is the benefit given in an environment that encourages good financial
advice that is in the client’s best interests? Consider including
compliance with internal processes and legal requirements, adviser
training undertaken etc.
Weighting of the benefit in relation to total
remuneration
What is the relative proportion of the benefit to the overall remuneration
of the employee, which includes the benefit and salary?
85
Rewarding Employees
An adviser receives a $5,000 bonus from their employer.
The bonus was paid in recognition of
 client satisfaction
 an increase in new clients
 productivity
 outstanding compliance ratings
 developing referral networks.
This is unlikely to be conflicted remuneration because it would not reasonably be expected to influence the
financial product advice given.
ASIC are less likely to scrutinise performance benefits that are designed to more closely align the interests of
employees who provide advice to retail clients with the interests of their clients.
Where the remuneration is based on total employer profitability (e.g. $100,000 fee for service generated), as
opposed to employee individual sales ($100,000 commission), would not be considered conflicted remuneration if
it could not be reasonably expected to influence the advice give.
86
Activity 1 – Remuneration payments
Consider the following remuneration payments that Advisers typically receive.
Review the following payments and decide if the payments are permitted from 1 July 2013.
Benefit
Conflicted
Remuneration?
You recommend OneCare Income Protection to a client after 1 July and receive 115%
upfront commission.
No
You have a client with an AMP Super Account that has been active with you as their
Adviser since 2008. You receive a monthly commission payment of 0.6%pa.
Yes
You have a client transfer their Super account to you in July 2013. The previous Adviser
was receiving ongoing commission of 0.8%.
Yes
You have a large Corporate Super account as a client. You currently receive a trail
commission which has been in place for the past 5 years.
No
You agree with a client to charge a one-off ASF of $1,100 for the cost of your advice
commencing July 2013.
No
If yes Grandfathered?
Yes
87
Activity 2 – Soft Dollar benefits
Below are soft dollar benefits that Advisers may have received in the past. Using the decision tree provided,
decide if these benefits are permitted to be provided and you are able to receive from 1 July 2013.
Conflicted ?
Sporting events
Bob is invited by OnePath to the State of Origin in Sydney, the cost of the ticket is $100.
OnePath also provides dinner and drinks which cost $100.
Greg is invited by MLC to four football matches throughout the year. The cost of the ticket each
time is $50. Drinks are provided which cost approximately $40 each event.
Bob is invited to the Formula 1 racing event in Melbourne by Asteron. The cost of the ticket is
$500 for the weekend. Asteron pay for the airline ticket, accommodation and all meals cost
being $2,500.
Conferences
George is invited by Asteron to attend their 3 day international conference in Singapore.
Asteron pays for George’s accommodation, other day trips and all meals however George pays
for his own flights. The time spent each day on education and training activities is six hours.
Andrew is invited to attend the RI conference in the Blue Mountains. It is a three day event with
between 6 and 5 hours of educational content each day. The cost of $2,800 for the conference
is paid by Andrew and as he lives in Sydney, he drives to the venue.
Social events
Debbie is invited to a bare foot bowls afternoon by Zurich. The day consists of lunch, drinks and
the bowls game. The total cost of the day is $100.
Ken is invited to attend a seminar by a motivational speaker by ANZ. The cost of the event is
$500.
Bob is invited to see Rolling Stones concert with dinner beforehand by Zurich. The total cost of
the night is $600 per person.
Can you accept it?
No
Yes
Yes
No
Yes
No
Yes
No
No
Yes
No
Yes
Yes
Yes
No
No
88
Activity 2 - Soft Dollar benefits
Below are soft dollar benefits that Advisers may have received in the past. Using the decision tree provided,
decide if these benefits are permitted to be provided and you are able to receive from 1 July 2013.
Conflicted ?
Software
Every month a product issuer offers the financial advisers of a dealer group an incentive of $500
if they sell a certain volume of the issuer’s products. From 1 July 2013, the product issuer no
longer makes this offer (the product issuer has not elected to comply with Pt 7.7A before this
date). Instead, the product issuer offers to provide the dealer group with access to software that
it owns, which allows the performance of a client’s investment in the issuer’s products to be
monitored. The software can be accessed by all of the dealer group’s financial advisers.
Marketing Allowances
Asteron pays for an advertisement sign at the local football field for Joe Brown. This sign
provides Joe’s company name, services and his licencee details. The cost of the sign is $500.
OnePath pays Bob $2,500 towards Bob’s new corporate brochure which describes his services.
Zurich pays $300 towards the client seminar that John is arranging for his A class clients. At this
seminar a Zurich representative will provide a presentation on the benefits of Personal Risk
insurance.
AXA contributions $1,500 towards the printing of client letters for Mary to inform her clients
about the upgrade of the AXA Superannuation fund.
Educational
George is invited by AMP to attend training at their city office which is a four hour session on
their new products. Lunch is provided however George pays for his own parking.
Andrew is invited by OnePath to attend their Meet the Manager Day in Sydney. The day
consists of 3 hours in the morning meeting the OnePath team with information on their services
and process requirements. The afternoon 2 hour session is product training. Lunch is provided.
OnePath pays for the flight and taxi fares to their office.
Can you accept it?
No
Yes
Yes
No
Yes
No
No
Yes
Yes
No
No
Yes
Yes
No
89
Questions & Group Discussion
May 2013
Conclusion
Annual Disclosure
• From 1 July 2013, all new and existing clients who receive ongoing advice must be provided with a Fee
Disclosure Statement (FDS).
Best Interests Duty
• From 1 July 2013 all Advisers must ensure that they have acted in their client’s best interests, and prioritised
the client’s interests above their own or the Licensee.
• Advisers must ensure their advice is appropriate as well as meeting the Best Interests Duties by demonstrating
and providing evidence that they have followed the ‘safe harbour’ duty and related obligations
Conflicted Remuneration
• Advisers will no longer be able to receive initial or trail commissions on new investment products from 1 July
2013. Any trail commission paid on Investment Loans, regardless of when the loan was established, are not
permitted.
• Employers (Proprietors) have specific obligations to ensure they do not provide conflicted remuneration
payments to their employees who give advice to retail clients after 1 July 2013.
91
Support
 Adviser Services
New FOFA section – coming soon
 ASIC website
ASIC Regulatory Guides (RG)
www.asic.gov.au/rg
RG 175 Financial product advisers—Conduct and disclosure
RG 245 Fee Disclosure Statements
RG 246 Conflicted remuneration
 Regional Practice Development Manager or Practice Development Coach
92
Appendices
May 2013
The impact of Stronger Super and MySuper
• General fee rules
• Transition to MySuper
General fee rules
• Apply to ALL super funds (except SMSFs and PSTs) from 1 July 2013
– Entry fees banned
– Conflicted remuneration banned
– Exit fees, switching fees and buy/sell spreads limited to cost-recovery basis
– Rules apply to performance-based fees
Transition to MySuper
• 1 January 2014
– All default contributions must be paid to a MySuper fund
– New contributions for both existing and new members
– Existing balance can remain in existing fund
– Commission can be paid on FUM and life insurance
• 1 January 2014 - 1 July 2017
– Exact date agreed between APRA and Trustee
– Existing balance transferred to MySuper fund
– Accrued default amounts
– All commission ends
– FUM and life insurance
MySuper and advice
• No bundled personal advice (except for intra-fund advice)
• MySuper funds can provide intra-fund advice
– Cost of intra-fund advice can either be shared across the MySuper membership or charged to
those who use the service
• Fees for advice (outside intra-fund advice) would be on a fee-for-service basis
– Negotiated between member and adviser
– Paid from the member’s account
– Payments for advice would require express annual renewal
– No upfront or trail commission
– No shelf-space or volume rebates