What does FoFA mean (to you)? 

As of 1 July 2013, the Future of Financial Advice (FoFA) reforms became mandatory. But what do the FoFA reforms mean and how does it impact financial advisors and wealth managers?

Well, to be fair, as a Government website, futureofadvice.treasury.gov.au does a pretty good job of explaining it without overcomplicating things - but there is always room for improvement. 

Below are five key points of the FoFA reforms (in plain English) with some tips for you, the financial advisor, to retain clients.


Highlights:
  1. Financial advisors are to remove commissions and instead rely on fee-for-service model for their revenue. For some this is a significant shift - which is probably why the Australian Government is calling this an "Overhaul of Financial Advice".
  2. Every two years your clients MUST renew their agreements with you (this is no longer an automatic affair) so it is crucial to stay in touch with your clients and continue to provide them with service(s) that they value.

1. Best interests duty. 

Financial advisors must "act" in the best interests of their clients. When giving advice, advisors should be "undertaking a number of specified steps" to determine the best interests of the client.

And on top of that, advisors must "take any other reasonable steps" to act in the best interest of the client before any advice is given.

Tips for financial advisors:

  1. Make your "steps" (or process) really transparent and accountable every time you provide advice.
  2. A solid "Service Offer" is a great place to start. If you don't already have one, Feedsy provides this as a starting point and has it right there in your app). 

2. Opt-in and fee disclosure. 

Every two years, clients MUST renew their advice agreements with their advisor. This renewal will no longer be automatic. Advisors MUST provide documentation of services and fees in an annual statement to all clients paying ongoing fees.

So this means greater transparency and a need to demonstrate value to ensure clients renew advice agreements.

Tips for financial advisors:

  1. More effort (and marketing) must be taken to retain clients (as well as growing your client base).
  2. Keep in regular contact with clients to show them that you care.
  3. Provide regular added-value by keeping clients informed and educated.
  4. Note: Feedsy connects you with your clients every week with quality news (and anything else you bring to the table).

3. Ban on conflicted remuneration. 

The days of relying on commissions or payments from financial product recommendations are numbered (if not, over).

Financial advisors must source their revenue directly from clients rather than indirectly from product commissions (unless the financial advisor can obtain an exemption).

Tips for financial advisors:

  1. You may be spending more time providing individual advice and therefore needing to streamline your marketing efforts to retain clients.
  2. Note: Feedsy minimises (or in some cases, reduces to zero) the amount of marketing effort required to retain clients.

4. Ban on soft-dollar benefits. 

No more non-monetary ('soft-dollar') benefits or kick-backs from financial products either. Gone are "free IT software or support, "training", "free" lunches and any other benefit under $300 in value.

Tips for financial advisors:

  1. Just say "no".

5. Scaled advice. 

The Government is trying to help you with this one. No, seriously. They are allowing you to offer a narrower or broader range of advice (e.g. superannuation, insurance, etc) than before.

So if "holistic" advice doesn't work for you or your business in a fee-for-service model, then you can scale your offer down (or, of course, up).

The only catch is, it also has to work for your client (remember the "Best interest duty"?) - so you both need to agree before you scale your services up or down.

Tips for financial advisors:

  1. To diversify or specialise? That is the question. Which works best for your brand?
  2. Thought leadership is a powerful marketing tool to position your brand as an expert - but it can be very time consuming. Feedsy provides content and publishing for you to build your "expert" status.

Silver Bullet

Unfortunately, there is no silver bullet to guarantee success from July 1, 2013 and we are certainly not suggesting that Feedsy is one. But what we can say is that from the FoFA reforms, Feedsy was born.

Throughout 2012, conversations with financial advisors and wealth managers kept turning towards looking for ways to connect and add-value with clients in a cost and time effective manner.

And there was a definite preference for this to happen on mobile devices.

So you could say that Feedsy is a love-child of the FoFA reforms.  Click here to join the family.

Other Marketing Strategies

So if Feedsy is not the only strategy what else can you do to optimise your efforts in the FoFA reform era?

Feedsy co-founder, Steve Holmes has over 26 years experience in marketing and sales in financial services - 12 of those as a Regional Marketing Manager for AMP Financial Services.

His financial services marketing consulting business, SHMarketing Consulting is there to help you with cost effective and specialist advice and marketing tools. For more info, visit shmarketing.net.au

 


Disclaimer 

The information on this site is intended as a general reference for internet users. It is made available on the understanding that Feedsy, as a result of providing this information, is not engaged in providing professional advice.