What you need to know
The significant changes to the Ongoing Fee Arrangements (OFAs) under the Delivering Better Financial Outcomes Act (DBFO Act) commenced on January 10, 2025. The new consent requirements for the OFA agreements will replace the Fee Disclosure Statements (FDSs). Here’s a breakdown of what you need to know to ensure compliance:
Key Information to Disclose
When entering into a new OFA, you must provide the following details in writing to your client:
- Account Holder(s) Name: Clearly state the name(s) of the account holder(s).
- Adviser Details: Include the adviser’s name and contact information.
- Consent Explanation: Explain why the consent is required.
- Consent Duration: Specify the maximum period until the consent will cease to have effect.
- Entitled Services: Detail the services the client will receive under the arrangement.
- Ongoing Fee Amount: Provide the ongoing fee amount or a reasonable estimate if the exact amount cannot be determined at the time of disclosure, along with an explanation of the estimation method.
- Account Number: Indicate the account number where the fees will be deducted.
- Fee Frequency: State the frequency of the ongoing fees during the period.
- Variation or Termination Statement: Inform the client that the arrangement can be varied or terminated at any time.
- Termination Condition: State that the arrangement will terminate, and no further advice or fees will be charged if consent is not given.
- Termination Date: Provide the date on which the arrangement will terminate if consent is not given.
- Reference Date: The agreed date on which to start the new arrangement.
Additional Considerations
Be aware that client consent forms from product providers may not include all the required information. In such cases, you must issue your own OFA agreement and have the client sign the Fee Consent form. Failure to meet all legal obligations will result in the termination of the arrangement.
The transition from Anniversary Date to Reference Date
Under the old legislation, the ‘Anniversary Date’ was fixed for 12 months after the adviser and client entered the arrangement. The change provides a more flexible ‘Reference Date’. The new renewal window allows consent to be obtained 60 days before and 150 days after the reference date. The Reference Date can be a nominated future date (up to 60 days in advance) for the arrangement to start, and the date the client signs the OFA can differ from the start date.
Licensee Requirements
Some licensees may have different requirements during the transitional period. It is essential to check with your licensee before making any changes to your process.
Stay informed and ensure compliance with these new requirements to maintain smooth and effective ongoing fee arrangements with your clients.
