You have probably heard the term FOFA, but may be unsure exactly what FOFA actually is and what impact it will have on us as your adviser and you.
FOFA stands for Future of Financial Advice and is designed to bring all financial planners inline with a fair and reasonable advice framework, in order to encourage more people to seek financial advice. These measures, introduced by the Australian Government, are in response to our ageing population, the trillion of dollars pouring into superannuation, and an increasing strain on our social security system.
FOFA is designed to help you make wise financial choices now and into retirement.
What are the new laws governing financial advice?
Below we summarise the changes for you in a simple table. We also explain how we, as members of the Financial Planning Association, have additional standards to meet above and beyond the law which give you extra peace of mind when getting advice from an FPA member.
| Area of advice | Before 1 July 2013 | After 1 July 2013 | FPA members… |
|---|---|---|---|
| Adviser (commission) payments from investment and superannuation products. | Financial planners could be paid a commission by product providers which meant that their advice to you could have been biased. | Financial planners can no longer be paid a commission by product providers. | From 1 July 2012, FPA members have an additional professional obligation to clearly explain the initial and ongoing fees you will pay, including any product and administration fees. |
| Client first (Best Interest) | Financial planners are not bound by law to act in your best interests. | Financial planners are bound by law to offer advice in your best interests. You have additional grounds to lodge a complaint if you believe that this is not happening. | Have always had a professional obligation to put your interests first. |
| Ongoing service | Your financial planner did not have to tell you the fees you pay on an ongoing basis. | Your financial planner must send you an annual fee statement every year. You may be asked if you want to continue your relationship with your financial planner every two years. If you say no or don’t reply, your access to that financial planner will stop. | Already have a professional obligation to explain clearly how your relationship will work, including fees and charges for any ongoing services. You have the power to stop paying for services at any time if you no longer require them. |
Not all financial planners are the same
- Genuine professionals go above and beyond the law. Level One advisers as members of the FPA also have professional obligations to look after you in the following ways:
- Explain any limitations in the advice we can give you, either in product types (e.g. insurance or investments) or in product providers (e.g. products from a limited range of companies);
- Not to misrepresent to you our skills, competency, experience, expertise, capacity or benefits we might receive;
- Clearly explain our professional services to you and to document the professional relationship you agree to, including the specific services we will provide;
- Before we provide any professional services, how we will charge you and the costs you will bear if you decide to go ahead;
- Explain the product and administration costs associated with our recommendation to you.
As always, Level One’s culture and values are:
- Integrity – to know what is the ‘right thing to do’, to be honest and truthful with ourselves and with our clients at all times.
- Courage – to make sure we act upon our integrity, even when it may be difficult or unpopular to do so.
- Trust – to act in a way that builds our client’s trust in us and to trust ourselves and our abilities when dealing with our clients.
- Enjoyment – to create an environment where our people grow and enjoy coming to work each day and our clients enjoy dealing with us.