FOFA Causes Havoc


Radar Results, M&A consultants to the financial planning industry, recommend you visit their stand at this year’s annual FPA Conference to be held in Sydney. From 17 October to 18 October you can have access to Radar’s expert consultants in the area of practice valuations, advice on buying a financial planning business or if you wish to sell, what to do. Not only can the Radar consultants provide advice on financial planning businesses, but also on accounting practices, mortgage businesses, SMSF client registers and risk books.


FOFA was introduced to give more Australians better advice at a lower cost. Some aspects of FOFA are doing the opposite; stopping planners from moving some clients from a commission system to a fee arrangement, basically to save the planner from more ‘paperwork’ and responsibility.

An annual Fee Disclosure Statement (FDS) now needs to be sent out to all clients who pay the planner a fee. The FDS must state what services were provided over the past year and at what fee level, plus what services will be provided next year and at what fee level.

A long serving planner recently suggested that a fee of $1,700 ‘sounds about Older man stressedright’ as a fee for an annual review. When quizzed on how he arrived at that amount, he said “Well, they have about $300,000 in FUM; what do you think John”.  I replied “I think it should be based on what value you have delivered, and plan to deliver in the next 12 months.”  I asked what the planner did for the client now “nothing, unless they call me and ask for a review” answered the planner. This is not an uncommon occurrence.

It would be good if planners could measure what it costs to look after that client for the year, and then going forward, determine a fee based on costs. I know it sounds difficult and complex, but for most of the 90’s that’s exactly what went on with accounting firms I worked with.