Advisers turn to platforms for FOFA compliance

As it has become clearer how much capability is needed to comply with the Future of Financial Advice (FOFA) reforms, advisers have turned to the platforms to do most of heavy lifting. 

Investment Trends chief financial officer Eric Blewitt noted last year that planners were looking to platforms to help them implement the most difficult elements of FOFA such as opt-in. 

Advisers are not as concerned about clients not opting in as they are about the administration of opt-in, senior investment analyst Recep Peker says. 

According to 2012 figures, 53 per cent of advisers say their largest FOFA challenge will be administering opt-in, Peker says. 

The other area where platforms can help advisers deal with FOFA is fee disclosure. 

VIEW ALL

View all

The fees and commissions that are relevant to complying with FOFA need to be easily accessible and transportable into whatever solution advisers use to create their annual fee disclosure statement, and platforms should be involved in that, says Rubik Wealth managing director Wayne Wilson.  

Thus far the platforms have been more than willing to do the hard work. 

BT Wrap has made a raft of changes encompassing transparent fee arrangements, including rate cards without platform payments built into the administration fee, and a dealer group advice fee arrangement allowing dealer groups to explicitly charge for the services they provide through a platform. 

The company’s priority is to help its dealer groups transition to the new environment, head of platform product Kelly Power said.  

Advisers need to develop a close relationship with their platform for the best results. Paragem chief executive Ian Knox warned this year that the degree of change required by dealer groups would be dependent on how they structured their relationship with the major platform providers.  

However, Fiducian Portfolio Services head of operations and business solutions Patrick Jackson warned advisers this month not to let the platforms completely control the process around opt-in. 

Platforms can assist with these requirements by providing letter templates, recording opt-in dates and offering a client follow-up service, but the responsibility remains with advisers, and they need to control it, Jackson said.  

Both Jackson and Wilson believe that the platforms are limited in how much they can help with FOFA requirements. 

The ideal solution would be to deal with FOFA issues at an advice platform level, not a product platform level, says Wilson. 

There may be examples where an institutionally owned planning business would look for the capability to handle FOFA compliance at a product platform level for 60 to 70 per cent of their client base, and handle the rest in another environment, but that was less likely, Wilson says. 

There is no doubt that the more administrative options there are, the better an adviser can satisfy the FOFA requirements, but most issues can be handled by financial planning software, according to Jackson. 

Storing anniversary dates, opt-in data, fees paid and producing letters are all within a platform’s capability, but they still only provide part of the picture. 

Planning software should provide a far more efficient mechanism to control the client relationship and provide the required information, Jackson said.