FOFA Update

Pas Bueti

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Agenda

This is a Question and Answer session, aimed at providing the latest information on:

FDS Best Interests Duty Conflicted Remunerations

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The elephant in the room

1. Removal of the opt in legislation

2. Fee Disclosure Statements not to apply retrospectively

3. FDS statements can be more general rather than specific

4. Step 7 of BID to be removed

5. Risk commissions allowable in super where advice is given

6. Ban on risk commissions in super only to apply to automatic cover arrangements

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Fee disclosure statements

Where we are now?

What do we need to do from here?

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Best interests duty

• The tools you should be using to embed BID in your businesses

BID Checklist

BID Working Papers

BID QAF

BID Guide to what’s changed

FOFA update

Benchmarking

Your licensee is obligated to ensure the APSL is constructed in an appropriate manner for your licensee’s client base and has been benchmarked. This will be provided to you shortly.

You can rely on the benchmarked APSL and there is no need to go off it (even where you know or suspect there may be a cheaper or more suitable off APSL product) provided that:

– You understand the benchmarking process

– You understand the features of the products on the APSL (know your product)

– You make a genuine assessment of the APSL product in light of your client’s needs

– The client does not have an existing product not on APSL

– APSL not limited to a single class of products (not the case for AMP licensees)

– The client hasn’t specifically requested you look at a product not on the APSL

Obligations on review

Best interests duty applies

Scope driven by contractual relationship between you and your client• If scope is not clear, reset with your client’s consent• Duty of care still applies

FOFA update

Alternative products and strategies

The need to consider alternative strategies is based on the complexity of the strategies and products under consideration:

– Non-complex strategies / products– Superannuation rollover and consolidation– Insurance recommendations– Retirement income streams

– Complex strategies / products

– Gearing strategies

– SMSFs

– North guarantee options

– Structured products / derivatives

– Existing product viable but strategy is complex

– Existing product not viable and strategy is complex

Scoping

Driven by what you agree with your client

Risks associated with proximate or adjacent areas to be considered

FOFA update

Better position statement

There is no requirement to consolidate this into one paragraph

The SoA / RoA needs to clearly articulate why the client is in a better position, taking into account the client’s goals, but this need not be in a single place.

Recording client instructions

There is no requirement to record this in the client’s own words

The instruction should state the client’s goal, not the strategy to get to the goal

Fact find, file notes and the SoA must tell the story, linking the recommended strategy to the client’s goals

Fee disclosure statement data

We had some data issues. Impact was either contract data completely missing or immaterial misstatement (eg RITC errors)

The one remaining known issue was resolved over the weekend

If you identify a data concern please report it with the specific details

Best interests duty – a summary of the additional requirements and where to find more information

Significant Requirement Documentation Requirements QAF reference

Raw Client NeedFact Find or file notes. Reflected in Advice documents

pp10/11

Expertise to advise In File notes or working papers. pp13/14

Better Position StatementIn Advice document with accompanying

modellingpp18-20

Benchmarking No documentation requirements p23

Scoping Fact Find, file notes and advice document pp11/12

Alternative products and strategiesFile note or working papers. Reflected in the advice document

p28

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BID – Whats next?

Case Studies

Guidance on Ongoing Reviews

Revised QAF and FAQ’s

Resource centre on Portal

Upcoming PD Days