Chapter 7 - Entering Fee Agreements
This lesson sets out the Licensee’s standard for entering into and maintaining Ongoing Fee Arrangements (OFA)
It applies to ongoing fee arrangements:
entered into on or after 10 January 2025 (start day), and
already in force on the start day, from the first anniversary of the arrangement that occurs after the start day..
What is an OFA?
An arrangement is an OFA if:
the authorised representative gives personal advice to a person as a retail client;
the person enters into an arrangement with the practice; and
under the terms of the arrangement, a fee is to be paid during a period of more than 12 months
What is not an OFA?
The following examples are not ongoing fee arrangements:
a payment plan, and
an arrangement under which the only fee payable is:
an insurance commission, or
an insurance premium, or
a product fee.
We recognise that advisers frequently enter into fixed-term agreements for charging a client fee for a period of 12 months or less. These are considered as non-ongoing fee arrangements and fit into the area of Fixed Term Agreements.
The Fee Recipient
The entity that enters into the OFA with the client (the practice) is referred to as the ‘Fee Recipient’:
What Are Your Obligations?
A fee recipient who enters into an ongoing fee arrangement with a client must comply with the OFA consent obligations.
These obligations include a requirement for fee recipients to obtain written consent from a client:
to enter into or renew (as relevant) an ongoing fee arrangement, and
for the ongoing fees that the client will be required to pay under the arrangement.
The written consent to enter into or renew an ongoing fee arrangement must be signed by the client and dated, and the fee recipient must retain the consent or a copy of it.
The OFA consent obligations also require fee recipients to obtain the client’s written consent before they can deduct, arrange to deduct, or accept payment of, ongoing fees from a client’s account
The written consent for the fee recipient to deduct or arrange to deduct ongoing fees from a client’s account must be signed by the account holder and dated, and specify:
the name of the account holder (i.e. the client name(s))
the account number
for each amount to be deducted:
the amount to be deducted, or
if the amount cannot be determined at the time of the consent, a reasonable estimate of the amount and an explanation of how it was worked out, and
any requirements specified in regulations
The Ongoing Fee Agreement (OFA)
There are 2 key documents that are included in an Ongoing Fee Arrangement:
The Ongoing Fee Arrangement (OFA).
The Fee Deduction Consent Form (Consent).
These 2 documents can be prepared and presented together. Generally, they will be generated as part of your Statement of Advice.
Important:
Both forms must be provided to the client. An OFA alone does not constitute Ongoing Fee Arrangement. A compliant ongoing fee agreement must include an executed Fee Deduction Consent Form.
What must be included in the Ongoing Fee Agreement (OFA)?
Before a client enters into or renews an ongoing fee arrangement, or before a fee recipient deducts, arranges to deduct, or accepts payment of, ongoing fees from a client’s account, the fee recipient must disclose to the client, in writing:
the name and contact details of the person who is the fee recipient under the ongoing fee arrangement
an explanation of why the fee recipient is seeking the consent
the maximum upcoming period before the consent ceases to have effect (see Question 12)
information about the services that the client will be entitled to receive under the ongoing fee arrangement during the upcoming period
for each ongoing fee that the client will be required to pay under the arrangement during the upcoming period either:
the amount of the fee, or
if the amount of the fee cannot be determined at the time of disclosure, a reasonable estimate of the amount of the ongoing fee and an explanation of the method used to work out the estimate
the frequency of the ongoing fees during the upcoming period
a statement that the ongoing fee arrangement can be terminated by the client at any time
a statement that the arrangement will terminate, and no further advice will be provided or fee charged under it, if the consent is not given, and
the date on which the arrangement will terminate if the consent is not given: see sections 962G(2) and 962T(a).
Preparing an OFA Document
The Fee Recipient must ensures that it uses the Licensee OFA Document Template.
If you are using Xplan or iC2, the OFA will be generated with your SOA.
If you are using a different CRM, you can access the OFA template from the Compliance Hub.
Fees Deducted via a Platform
Where a fee is to be deducted from a platform, the platforms Fee Deduction Consent Form must be completed, in addition to the licensee Fee Deduction Consent Form.
Important:
The platforms Fee Deduction Consent Form does not alleviate the obligation to provide your client with the licensee Fee Deduction Consent Form.
Fees Deducted via a bank account
Where a fee is to be deducted directly .
Important:
The platforms Fee Deduction Consent Form does not alleviate the obligation to provide your client with the licensee Fee Deduction Consent Form.
Electronic Signature
The OFA Disclosure and Consent Form may be provided in hard copy or electronically.
It may also be signed in wet ink or electronically.
Examples of electronic signature are:
clicking a check box on a webpage in response to a statement such as: ‘By ticking the box, you consent to renewing the ongoing fee arrangement and to the charging of the ongoing fees that are set out in this document’; or
sending written consent via email with an electronic signature attached.