From 1 July this year, FPA members can access relief from the opt-in laws by registering for the FPA Professional Ongoing Fees Code. After four years of development with ASIC, FPA General Manager Professional Standards, John Bacon talks about what the code means for the profession.

What is the FPA Professional Ongoing Fees Code?

John Bacon (JB): The FPA Professional Ongoing Fees Code (the Code) was approved by the FPA Board on 28 September 2016 as Practice Standard 7.6A under the FPA Code of Professional Practice.

ASIC has approved the Code, which provides participating FPA members with access to relief from the opt-in laws when engaging clients in an ongoing fee arrangement.

The FPA Professional Ongoing Fees Code takes effect from 1 July 2017 for FPA practitioner members who choose to register with the FPA to gain relief from the opt-in laws.

Members can access a copy of the Code and additional information at: fpa.com.au/fpaongoingfeescode

Why was the Code developed?

JB: The Code takes advantage of a provision that was negotiated at the time of the FoFA changes with the then Labor Government. The legislation provided that if you had a code approved by ASIC, it obviated the need for the opt-in arrangements, which ASIC could grant relief from.

The Code was developed to improve on the opt-in arrangements in the law for FPA practitioner members and clients.

Through the negotiations with the previous government over FoFA, FPA members consistently told us that the opt-in arrangements would hurt their engaged clients by forcing them out of ongoing service arrangements against the client’s best interests.

We advocated that our members operating in a professional service arrangement with their clients should have access to relief from the ‘one-size-fits-all’ approach in the law.

Who is the Code for?

JB: The ASIC legislative instrument makes the relief available exclusively to CFP® professionals and Financial Planner AFP® practitioner members of the FPA. To participate in the code, these practitioner members must be a financial member of the FPA at the time of sign-up, must register for the Code and remain registered under the Code as a member of the FPA.

How does the Code benefit FPA members?

JB: The opt-in arrangements in the law recognise that there are disengaged consumers who are paying for services they don’t need and also paying for services they don’t receive. But the problem is the opt-in arrangements is a ‘one-size-fits-all’ solution.

It fails to recognise that there are good businesses operating and that there are practitioners doing absolutely the right thing by their engaged clients.

By commencing and continuing their client engagements in accordance with the code requirements, FPA members will gain more flexibility in how they manage their client engagements than allowed for in the opt-in law.

FPA members who apply and meet the eligibility criteria, will be registered on a public register. Those registered will not have to comply with the requirement in s962K of the Corporations Act (Cth) 2001 to provide a biennial ‘opt-in’ renewal notice to their clients in an ongoing fee arrangement, and will instead utilise the arrangements under the code to renew such arrangements with their client every three years.

How does the Code help consumers?

JB: It ensures they receive value from an ongoing service arrangement from the practitioner. This includes:

• The Code requires the FPA member to assess the suitability of an Ongoing Fee Arrangement before it is entered with the client, to regularly review its suitability with the client, and to reassess its suitability whenever the Ongoing Fee Arrangement is renewed.
• It establishes that an Ongoing Fee Arrangement must not continue without being reassessed for suitability at least every three years.
• It establishes specific obligations to transparently document the arrangement and the services with the client.

What is the Code registration process?

JB: CFP and AFP practitioner members can ‘opt-in’ to the benefits of the code via an online registration process being built to coincide with this year’s membership renewal. To be eligible, you will need to:

• complete your 2017-18 FPA membership renewal;
• complete an e-learning package on the FPA Professional Ongoing Fees Code (free for FPA members);
• sign a registration agreement;
• have your AFS licensee authorise you to participate in the Code; and
• provide a copy of your template complying ‘letter of engagement’ that you will use with your clients under the opt-in Code.

There will be a public register of Code compliant members available on the FPA website that consumers can check.

What resources are available to help members be Code compliant?

JB: The FPA has already conducted a webinar on the FPA Professional Ongoing Fees Code on 15 March, which members can access on the FPA website.

The FPA website also has a dedicated page on the FPA Professional Ongoing Fees Code, which will include a wide range of information, tools and resources, including letter of engagement, FSG and Authority to Proceed wording templates.

These resources can all be accessed at: fpa.com.au/fpaongoingfeescode