The 1st of July has come and gone, the Future of Financial Advice (FoFA) reforms are here and many advisers are still hitting hurdles when it comes to generating fee disclosure statements (FDS). Professional Planner asked Midwinter Financial Services managing director Julian Plummer (pictured below) how advisers can streamline this process given his experience in developing financial planning software.

According to the Midwinter FoFA survey conducted last month, twenty per cent of IFAs didn’t think they would be able to start creating FDSs come July 1.

In helping a number of planners preparing their business for FDSs, we have experienced first hand some of their confusion in setting up their FDS capability.

We have found there are 3 basic steps you must undergo to get yourself from zero to FoFA.

Identify FDS clients

The first step is to ensure you have a handle on who should be receiving a FDS from you. You have a duty to provide a FDS to any retail client that has been given personal advice with whom you have an ongoing fee arrangement.

Make sure these clients are identified in your planning software as fee disclosure clients.

Take the time to understand how your software handles client groups – for example, does it send a FDS to each individual client, or to each client grouping (husband or wife)?

PlummerEDMAdvice fees

The second step is to identify the types of fees received for each individual client. In determining the fees received from clients, a commission data feed comes in handy.

There are complicating factors when dealing with commission data feeds, such as some data feeds from platforms may aggregate advice fee payments meaning advisers have trouble identifying the split between commissions and ongoing advice fees (they are often ‘bundled’ together in the feed).

Faced with this, advisers have no choice but to manually sift through each transaction to determine the agreed ongoing advice fee component for inclusion into a FDS.

Fee for service payments via an invoice can further confuse the situation, as the process of matching up an invoice to a bank account statement is an inexact science.

Services

The final step is to be able to efficiently track and record entitled and received services. Most planners are aware of their requirement to list the services each client was entitled to receive over the previous year, along with the services that were actually delivered.

To meet this requirement, you need a method of determining entitled services, and a system to mark them off. Planners are often advised that a client segmentation system can solve this issue for them. If an adviser can determine which clients receive particular services through their segmentation model, the “services provided and received” section of a FDS can be populated.

While all of this may be true, advisers who have gone through the process of successfully implementing their FDS system will tell you it is just not good enough to have a “gold, silver, bronze” system. Instead, look for a system with the flexibility to add and remove services for each individual client.

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