CEO Update

This is a reminder that the FPW Cyber Survey will be sent out toward the end of February/early March. Please set aside some time to complete this review and let us know how you are tracking with these responsibilities.

Automatic generation of reports showing the status of your EFDS responsibilities commenced with the Practice Fundamentals work following changes to EFDS more than 12 months ago. These reports will help you to avoid breaches by providing a good level of early warning around your maturing Fixed Term Contracts and the numerous responsibilities for Ongoing Service Agreements. The idea is to have these issued each month to a nominated person in your business who has overall responsibility for ensuring the information is used to ensure that service delivery is maintained, and any non-compliance is avoided or identified early.

We are aware that not all businesses are receiving these reports. Please carefully consider who the responsible person in your business is and check if they are receiving these reports. If no one in your business is receiving them, or if the nominated person is to change, please contact [email protected] so we can arrange for this to occur.

On 13th June 2023, the government announced its response to QAR would be broken into 3 tranches.

Stream 1 – removing onerous red tape that adds to the cost of advice with no benefit to consumers
Stream 2 – expanding access to retirement income advice
Stream 3 – exploring new channels for advice

Stream 1
On 14th November we saw the draft legislation for Tranche 1 consultation which closed on 6th December.

These changes included the following:

While we expect (hope) some of the proposals will be modified, it’s clear already that the only clear win is the removal of the look back component of the EFDS. Despite its removal from the new consent, advice businesses will still need to be aware of the cost charged for services provided in prior periods as it is at this time many overpayments in fees become evident. We still have challenging timeframes to meet and any failure (civil penalty provisions which must be reported to ASIC) will become the responsibility of the fee recipient (the adviser) rather than being shared with the product provider as is presently the case.

FSGs will be a win but I suspect this is more a housekeeping issue than an efficiency gain.

Consultation closed on 6th December, and we await finalisation of the legislation.

In November, Stephen Jones announced the government would release its final position on the outstanding recommendations (Stream 2 & 3) of the QAR before the end of the year, with further legislation to be released in 2024. In his speech on 6th December, Mr Jones foreshadowed changes as follows:
• Modernise best interests and remove safe harbour
• Replacing SOAs with fit for purpose records set out in a clear, concise manner
…..o Subject matter
…..o The advice (products and strategies)
…..o Reasons for the advice (information about the client the adviser considered)
…..o Cost to the client and benefits to the adviser
• Introduce a class of adviser that works for an institution (super funds, life and general insurers and banks). This adviser will provide advice on less complex matters. Name yet to be determined, this “qualified adviser” will be prohibited from charging a fee and qualifications will be mandated by government (likely to be a diploma). The licensee will be wholly responsible for advice under new obligations.
• Sole purpose will be determined by a list of “qualifying” advice topics such as retirement projections, drawdown strategy and recommendation about retirement products. This advice will also be able to consider the broader circumstances of the household e.g. debt and assets, their partner’s situation, and eligibility for the Age Pension and other government support.

On 16th February, Treasury commenced another round of consultation regarding the proposals for implementation of Quality of Advice Review (QAR). These roundtables include representatives of institutions and adviser groups, to work through the legislative and technical details of the government’s financial advice reform package. We can expect to see a two-to-three-month consultation period.

This then leads to draft legislation with another period of consultation to the broader community. From here, we can expect the parliamentary process, including any parliamentary enquiries, and a review from ASIC who will need to update their guidance which includes a consultation process as well. Parliament will also need to consider the distraction of an election, likely to be held between 3 August 2024 and May 2025. All in all, do not expect these later changes to be in place before mid-2025 depending on any implementation period.

The Australian Taxation Office (ATO) has announced it will no longer allow super funds and IDPS operators to claim a reduced input tax credit (RITC) on behalf of members for adviser service fees (ASF).  This change will be effective from 1 July 2024.  If you use products that allow for RITC, please check with your product providers to ensure you are across their method of client communication for this issue.

As our agreement include the fee expressed on a GST inclusive basis, there is no need for you to do anything.  If your client has had the benefit of the RITC they will experience the change as a fee increase even though the fee charged by the adviser remains the same.

Our optional RITC template text will remain available within the Service Pack wizard, however, be aware that as we move forward the mix of RITC and non RITC will change moving forward.  If RITC does not apply, please do not add this text into your documentation.

The key priorities that the Advice Technology Committee are focused on are listed below:

• Reviewing and assessing;
…..o the Review File Note wizard to ascertain any opportunities to create efficiencies within the modelling section (i.e. Xtools+)
…..o the existing Fitzpatricks Workflows to creating efficiencies within the advice process and minimise the number of underlying tasks.
…..o options for the automation and integration of file notes with Xplan.

For any further advice technology enhancement requests, please click here to submit your ideas.

Just a friendly reminder that IRESS have reviewed their Xplan pricing and notified us that their pricing is increasing by 5.75% to reflect growing costs. This price increase will be effective 1st April 2024.

The 2024 Calendar of Events is available on the Adviser Portal enabling you to map out the next 12-month plan for Fitzpatricks community events that include, professional standards webinars, adviser days (March 2024) community gatherings and our Conference.

We held our first Sydney Community drinks at Downtown Matteo last Wednesday and a very big thank you to the crew that kicked this off. We achieved our purpose of bringing community members together to share stories and learn more about each other whilst sharing a few good laughs.

If you are based in NSW, or just visiting to see clients, please join us or contact [email protected] for more information. Everyone is welcome !!

Mark these dates in your calendar, so you don’t get FOMO.

Don’t forget to get on board with the DBA users “think tank” led by Belinda Kennedy of Rothgard. You can simply reach out via COCO in Teams, all you need to do is notify the group of your interest via Microsoft Teams and select the “Practice Administration” tab by following the link here.

We kick off the year with a reminder of our professional responsibilities and talk through some of the latest developments in cyber-attacks.  We have a special guest who will speak to you from experience on what he is seeing in our industry, and provide ideas on how to keep your clients, your business and yourselves safe.  We recommend this session for all advisers and support staff who undertake administration activities or have access to client records.

We would like to inform you of a change in the dates for our upcoming webinars. Please note the revised schedule can be accessed here through the Adviser portal.

2024 has got off to a very busy start with marketing continuing to work on the new Adviser Portal and the National Firm brand refresh. We look forward to sharing the progress of these with you over the coming months.

Lonsec have revised their projection rates, primarily because of the higher cash rates which now exist in the marketplace.  The higher cash and fixed interest rates mean projection rates for diversified portfolios are also higher.  FPW has updated various materials to reflect the latest projection rates and / or ensuring tables and charts are current.  XPLAN and advice content has been updated.

The following documents have been updated to reflect these changes effective from 29th February 2024.  Please ensure that any previously downloaded material is updated to show the newer, current information here.
– Investment Philosophy Brochure
– Understanding Investment Risk Guide for Clients
– Risk Profiling Workbook
– Risk Profile Presentation
– Asset Allocation and Return Forecasts

HUB24 Fee Calculator – the HUB24 Fee Calculator located here has been updated to cater for the Core and Choice menu Expense Recovery fee changes. Xplan Wealthsolver has also been updated to include the new Discover menu pricing.

HUB24 recently updated, in late 2023, the PDSs for both Super/Pension and ordinary Investment products. You should refer to the information provided to you by HUB24 for details about all the changes.  In brief these are:

• Changes to the expense recovery methodology which applies to both super/pension and ordinary money. As part of this change, the Expense Recovery rate on super/pension accounts is reduced from 0.035% (capped at $350) down to 0.025% (uncapped). There is no change to the Expense Recovery rate for ordinary Investment accounts. HUB24 have advised that all advisers who have clients impacted by these modest fee increases have been contacted.
• HUB24 have also added products such as Allianz Retire Plus Guaranteed for Life (AGILE) product can be accessed via the platform. Please see the current PDS for details.
• Introduction of a new pricing menu (Discover).

The introduction of this pricing option compliments the existing Choice and Core menus.

The new Discover menu contains 35 managed account portfolios from 8 different investment managers. There are no TDs, direct equities or single sector portfolios on the Discover menu, although a cash account exists. The underlying assets in each of the 35 portfolios consist of managed funds and/or ETFs – i.e. there are no underlying holdings in direct equities for portfolios on the Discover menu (this is to help them with keeping the minimum investment low at $10,000). All the portfolios are multi asset diversified (i.e. no single sector options). Active or passive portfolios are available, including a few ESG portfolios.

The investment managers on the Discover menu are Vanguard, Betashares, Blackrock, Lonsec, Zenith, Morningstar, Elston and AZ Sestante. On a side note, the Vanguard managed accounts, which will be on the Discover menu, will be added to the Choice menu in 2024.

Interestingly there is portability between investments on the Discover, Core and Choice menus, albeit with some restrictions due to differences in underlying holdings for some managers – e.g. Lonsec direct equities does not exist in the Discover menu but would apply in the Choice menu.

Fees for Discover are bundled (i.e. admin and investment costs are combined), and range from approximately 60bps to 100bps, depending on the investment amount and portfolio. Be aware that fee tiering within the Discover menu occurs at the individual portfolio level, so each individual portfolio pays the initial tier fee level plus other relevant level and there is no family fee aggregation for the Discover menu. There is no differentiation in fees between Super/Pension and ordinary Investment accounts. Expense Recovery is an additional fee for both Super/Pension and ordinary Investment accounts using the Discover menu. Aggregation of account fees between Discover accounts with other HUB24 menus (e.g. Core and Choice) does not apply. This brochure provides further information, however does not reflect the FPW Hub24 pricing.

CFS have advised that the Colonial First Wrap platform will be closing sometime in 2024.  Although full details of the transition process, the dates and details of all features of Edge relative to First Wrap are currently unknown, we do know that Colonial will be using the Successor Fund Transfer (SFT) “rules” to transition accounts from First Wrap to Edge.   Details still to be resolved include features and operations of Edge.  For example:  details such as “tiered pricing for additional money added to an existing First Wrap account which is transitioned to Edge”, or “moving an existing First Wrap account transitioned to Edge which subsequently transfers from super to pension”.

Colonial expect the SFT to occur towards the end of 2024 when First Wrap will be decommissioned.  SFT requires clients not to lose features, and any existing pricing or features must be “grandfathered”, so the client is not disadvantaged.

You can use our Colonial Edge Fitzpatricks Pricing Calculator for new accounts. This can be used to assist a pricing comparison, between the incumbent (soon to be defunct) First Wrap and new Edge platforms. Both calculators are on the Adviser Portal.

Edge has some variable pricing dependent upon investments selected. This is not unusual for platforms. In simple terms, nil platform administration fee may apply if the investments used are in the Accelerate 100 Fund list, and a 30% platform administration fee discount will apply if the investments are in the Accelerate 30 Fund list. Thus, use of certain investments can potentially result in lower cost to the client.

Further information can be found in the flyers or, for more information, contact your local Colonial representative, or one of the Colonial worker people below.

CFS Edge – The New Possible Adviser Flyer
CFS Edge Accelerate Managed Accounts
CFS Edge Product Information Flyer

Colonial Contacts
Michael Gordon, Key Account Manager, Sydney NSW, Mobile: 0481 469 883, [email protected];
Andrew de Brito, Edge Implementation Manager, Sydney NSW, Mobile: 0434 883 870, Email: [email protected];
Michelle Krig – [email protected];
Andrew Nguyen – [email protected];
Amanda Lim [email protected]