The FPA and ISN's FOFA agreement

FPA and ISN joint position on FOFA

ISN and the FPA have agreed a joint approach to future regulation of a best interests test and ongoing charging by advisers, and disclosure of advice fees.

It is proposed to present their joint position to Government. 

• (a) Joint FPA/ISN support for biennial “opt-in” for a period of at least 4 years from the commencement date and applying to New clients only. 
• (b) The support for opt-in (a) is conditional on (c) & (d) being met.
• (c) That the Government agree to present and table legislation in Parliament by 1 July 2013 that will:
  • (i) enshrine the term “financial planner” in law; and
  • (ii) require financial planners to sign up to an approved code of professional practice which explicitly requires financial planners to provide ongoing financial planning services where an ongoing fee is paid; and 
  • (iii) the proposed law will adopt the recommendations of the Advisory Panel on Standards and Ethics made in November 2011 creating the obligation for all providers to subscribe to, and Licensees to participate in, an approved Code.
• (d) The government must actively facilitate the introduction of this legislation and ASIC must actively progress the operationalising of the legislation to market application and the professional community must develop appropriate standards solutions, within the 4 years of the opt-in period. 
• (e) Licensees and professional communities that have advanced their application of these processes, and have put in place appropriate professional regulatory management practices to obviate the need for legislative opt-in requirements, as independently assessed by ASIC, will be able to receive class order relief from the provisions of the opt-in requirements 

For clarification - The parties acknowledge that those providers who do not satisfy the requirements under (e) or who do not meet the requirements of future legislation developed in accordance with (c) continue to be subject to opt-in requirements under FoFA.

Best interests

• (a) The proposed note in the government’s amendments be amended to say “Nothing in s961B(2) is inconsistent with a provider limiting the subject matter of the advice where this is consistent with the client’s relevant circumstances. To be clear, the adviser can exclude from their inquiry any client circumstances which are not reasonably relevant to the identified subject matter.”
• (b) ISN will support the FPA’s proposed amendments to 961B(2)(g). [Note: this is subject to minor mutually agreed wording amendments, if any, to ensure the integrity of the intent of the amendments]
• (c) ISN proposes that the regulation making power be expressed more broadly to allow regulations to be made to clarify how scaled advice can be delivered consistent with the requirements of 961B(2) including defining expertise and relevant circumstances. [Note: this is subject to minor agreed wording amendments, if any, which ensure the integrity of the intent of the amendments].

Supplementary comments: We confirm that the intent is very clear that both the FPA and ISN agree to a joint position on Best Interest and agree that amendments will be made as intended in (a), (b) and (c) subject to final negotiations on wording to ensure the intent.

Annual disclosure

• (a) The annual disclosure for existing clients will apply to advices fees only and excludes disclosure of trail commissions.
• (b) Annual disclosure to New clients will exclude trail commissions on insurance products on the understanding that these commissions are fully and clearly disclosed in annual renewal notices provided by the insurer or super fund to clients.”