Futuro Financial Services

1. Futuro Financial Services ABN 30 085 870 015 AFSL 238478

2. Compliance July 2014 Paul Kelly and Christopher Hirst Adviser Network Meeting

3. Agenda • Re-engineering the advice process: Project management approach • Risk Profiling: Buckets of money approach to asset allocation • Sterling update • Are you giving Credit Advice • Complaints: avoidance • CPD Training/Accreditation in the new world • Obligations of a CAR for FOFA • Adviser profiles • POA Executors

4. Project Management

5. Project Management • What is Financial Planning • How to Be a Successful Adviser • Client Engagement • Advice Formulation • Advice Presentation • Advice Implementation • Ongoing Advice and Service

6. Project Management

7. Risk Profiling • Buckets of Money

8. Sterling update • Updated MF • Statement of Advice – MF Rollover • Statement of Advice – Super Rollover • Updated Super PDS • Updated Offer Documents • Sterling Super New PDS • Sterling Super New Trustee - Sept • Sterling Super New Reporting – Sept.

9. Are you giving Credit advice • What is credit activity? • Outline easy ways to keep advice generic so you don’t cross the lines into credit • Understanding the new referral process • New Credit Advice Documents – when and how they should be used

10. Are you giving Credit advice You provide credit assistance or a credit service if you: Suggest, recommend or assist a consumer/client: • Apply for a particular credit contract or consumer lease • Increase in a credit limit on a particular credit contract or consumer lease • Remain in current credit contract or consumer lease If you do any of the above, you will need to become a credit representative, hold your own credit licence, or change your business habits.

11. Are you giving Credit advice

12. Are you giving Credit advice

13. Are you giving Credit advice

14. Credit Guide • Provided at first interview • Similar to FSG and provided at the same time (if credit assistance is being provided) • Outlines who we are, how we get paid, how to contact us and how to make a complaint Are you giving Credit advice Credit Representative Credit Guide • Provided at first interview (if credit assistance is being provided) • Outlines details relating to fees and areas of authorisation specific to the credit representative Credit Quote • Provided to the client as soon as you discuss making a recommendation around credit activity • Outlines the maximum amount of fees/commissions you may receive from providing credit activity Preliminary Assessment • Provided to the client after the Client Data Form but before you produce the Credit Proposal Disclosure Document • Outlines such information required to determine if the credit product is not unsuitable for the client Proposal Disclosure Document • Provided to the client at final interview stage before implementation • In addition to the SoA and should be provided to the client at the same stage as the SoA • Outlines specific product details, fees/commissions payable, risks and disadvantages

15. Are you giving Credit advice-referral Disclosure of referral commission is required upfront

16. Referral consent form Includes: • Authority from client allowing client details to be passed to broker • Details of what credit services the Mortgage Broker can provide • Disclosure of referral fees or benefits • Statement outlining that the Referrer is unable to provide credit advice

17. Are you giving Credit advice • If you don’t think you cross any of the lines we have talked about, then you are ok and won’t need to do anything • If you will only be referring, you will need to use the form that has been developed and ensure you pass on referrals within the set five day time limits • If you think you can stay out of credit by providing only factual or generic information, then you don’t need to do anything • If you are going to cross the line into credit, you will need to become either a credit representative or hold your own credit license.

18. Complaints – Avoidance • Step 1 – always communicate with your clients. A happy client generally makes no complaints even if the markets are dropping. Most people want to be informed about what’s going on and are fearful when they are left in the dark. Fearfulness generally leads to uncertainty, and uncertainty leads to doubt. Doubt is one of the key drivers to question whether a client’s adviser is actually doing a good job. • Step 2 – never leave gaps in the advice process. Incomplete fact finds or lack of file notes show inconsistencies in the advice process. The Ombudsman will not provide you the benefit of the doubt; if it doesn’t exist, either on hard copy or electronically, it didn’t happen. Complainants do not go on a stand and swear to tell the truth and nothing but the truth therefore the FOS case manager presumes the lack of continuity of advice. • Step 3 – ensure you keep the advice within the client’s risk profile. Whilst there may be variations between asset classes, one of the biggest problems is that the client’s risk profile has not been applied to the advice that has been given. For example, the client’s original agreed risk profile was Balanced but the adviser recommended a number of unlisted property funds or agri-business products, which exceeded the client’s tolerance to risk in that asset class. This variance was never explained to the client in the advice document and the client is stuck with dead or locked up assets, which become the subject of the complaint.

19. Complaints – Avoidance • Step 4 – review clients every year. We all know the GFC was painful but not reviewing a client for fear that they may get angry because of low performing assets only infuriates them further into making a complaint. A good review highlights changing markets and client’s appreciate the honesty advisers provide in what has happen and what can be done to better their asset situation. Reviews also show the Ombudsman that you’re showing due care and skill towards your client. • Step 5 – follow Licensee directions. Futuro has always got your back in a complaint but we rely on you to keep good records to provide us with the relevant information when needed. Given the size of the complaint, the PI insurer may request their legal representative to step in and defend it. This is out of our control and imposes the excess that you need to pay upfront for them to defend the claim.

20. CPD Training/Accreditation in the new world • General AR’s – 30 points + TASA 10 points = 40 points • CFP AR – 40 points + TASA 10 points = 50 points • General AR + Credit AR – 30 points + 20 points + TASA 10 points = 60 points • CFP AR – 40 points + Credit AR – 40 point + 20 points + TASA 10 points = 70 points

21. CPD Training/Accreditation in the new world • Direct equities • SMSF • Structured products • Margin lending • Business insurance • Aged care

22. Obligations of a CAR for FOFA • A Corporate Authorised Representative (CAR) is a body corporate (i.e. a company) appointed as an Authorised Representative of Futuro Financial Services, to provide financial services to clients on behalf of Futuro. • For example, Futuro may authorise ABC Pty Ltd ACN or ABN xxxxxxx trading as ABC Wealth Wizards as a CAR to provide financial services on behalf of Futuro. • ABC Pty Ltd may sub-Authorise Representatives (SARs) to provide financial services on behalf of ABC Pty Ltd as CAR, subject to Futuro’s authorisation.

23. Obligations of a CAR for FOFA • Whilst outside of the scope of this presentation, the actual corporate structure adopted by the CAR will depend on the nature of the business. For example, one CAR may comprise two advisers, whereas another CAR may have multiple advisers (i.e. SARs), responsible for specific areas of the business such as risk advice, mortgage advice or financial planning advice. • CARs should consider their structure keeping in mind the following types of agreements, including for example: • Employment agreements • Partnership agreements • Consultancy agreements

24. Obligations of a CAR for FOFA • In order for the CAR to provide services, it must ultimately do so through individuals associated with the company. The CAR sets out the terms of the employee/contractual agreement between the Sub-Authorised Representative (SAR) and has responsibility for the SAR, whilst that SAR acts under the CAR. • Whilst SARs are nominated by the CAR, Futuro is responsible for the actual appointment of the nominee as a SAR. This appointment is reflected in the SAR Agreement. This agreement is entered into between the individual SAR and Futuro. • SARs should have separate contractual arrangements with the CAR. This may take the form of an employment contract or a consultancy agreement, depending on the arrangement between the CAR and its SARs.

25. Obligations of a CAR for FOFA Broad Compliance Obligations • As the saying goes: ‘Rarely do people join in the same spirit as they leave the business’. This is why CARs must ensure that they have adequate procedures, systems and practices in place to meet their requirements under the Corporations Act (Cth) 2001. • Poor procedures, practices and inadequate systems may expose the CAR to breaches of the Corporations Act, which may lead to the banning of SARs, directors of the CAR’s company and the eventual dissolution of the CAR. • CARs should consider the need for Directors and Officers insurance. This policy is designed to provide cover for any loss arising from a claim as a result of a wrongful act committed while performing duties as a director or officer of the company. The policy is designed to protect the personal assets of the directors and officers.

26. Obligations of a CAR for FOFA • CARs need to be aware of the key obligations and risks associated with this structure so that they can identify and isolate individual issues and seek assistance for tailored solutions in such areas as: • Recruitment and Onboarding • Client Ownership • Contractual Arrangements • Quality of Advice • Monitoring and Supervision • Training and Education • Record Keeping

27. Obligations of a CAR for FOFA Recruitment and Onboarding CARs are responsible for recruiting suitably qualified personnel into their business • Sourcing New SARs – who are you using? • Reference checking – who monitors the upfront and ongoing fame and character of your SARs? • Client Base – are you comfortable with your SAR’s client base? • Best Fit – Does your business know who you want to employ? How we can assist you • Do you require any assistance and/or tools to identify and mitigate risks when onboarding new people into your business? • Does your business have a comprehensive understanding of who your SARs are and whether any gaps exist in your current processes?

28. Obligations of a CAR for FOFA Client Ownership The CAR must determine who ultimately owns the clients. • Ownership – When a new SAR joins the practice have you considered the impact of cross or single ownership of any existing or new clients the SAR may bring to the practice? • Protection of Revenue – how do you protect your revenue in the event of adviser/client exodus in light of FoFA? • Adviser Longevity – Have you considered who retains the clients under succession planning? • Disputes – Have you considered the impact of relationship breakdown? How we can assist you • Do you require assistance with establishing the appropriate ownership structures now or in the future? • Have you spoken to your State Manager?

29. Obligations of a CAR for FOFA Contractual Arrangements The CAR must have an agreement with the appropriate terms and conditions in place for all SARs. • Regulatory Change – Have you reviewed all of your existing agreements to ensure compliance with FoFA? • Remuneration Structures – Have you considered how you are to remunerate and/or reward your employees post FoFA? • Terms and Conditions – Do your current agreements cater for serviceability of clients, absenteeism, suspension, termination and/or banning of SARs? How we can assist you • Do you need assistance with redrafting your employment/consultancy agreements? • Do you understand your requirements under the Competition and Consumer Act 2010? • What options under your SAR agreements do you have in place for exiting SARs?

30. Obligations of a CAR for FOFA Quality of Advice CARs are responsible for all advice provided by their SARs. • Quality of Advice – How do you maintain consistency in the quality of advice of the CAR’s clients? Are you testing the quality of advice provided by your SARs? • Reputation Risk – What protection mechanisms do you employ to protect your business in the event of ASIC undertaking an inspection of the CAR’s records or targeting specific SARs for further investigation? • Approved Products – What processes/procedures do you have in place to ensure consistency with the Approved Product List and/or Research requirements? • Claims Management – What processes do you have in place to protect the business from claims resulting from poor quality advice? How we can assist you • What does quality advice mean to the CAR? • Do you need help with transferring new clients into the CAR that have non-approved products? • Do your SARs and/or support staff need further training about providing quality advice?

31. Obligations of a CAR for FOFA Monitoring and Supervision CARs must check to ensure that their SARs are adequately monitored and supervised throughout the year. • Audits – AMP will perform an annual audit of all SARs and advise the CAR whether there are any issues. It is incumbent on the CAR to ensure that all remediation is completed in a timely and effective manner and the SAR understands the issues involved. • It is important for the CAR to buy in or commit to the entire audit process and outcomes. The CAR is best placed to quickly locate any apparent irregularities in the day-to-day operations of the SARs for which the CAR is responsible. How we can assist you • Have you determined the compliance culture within the CAR? • Does everybody in the CAR understand the importance of the Remediation process? • What processes do you have in place outside of the annual audit to ensure that SARs are compliant?

32. Obligations of a CAR for FOFA Training and Education CARs need to ensure that SARs are appropriately qualified and hold the necessary accreditations to provide advice. • Accreditation – Do you know your SAR’s competency level? • Competency – Are you comfortable your SARs are competent in the delivery of advice? • AEE– Do you understand how the education technology system works? • Training Plans – Do you understand your SARs yearly training program/CPD requirements and do you ensure they meet all of their compulsory requirements? How we can assist you • Do you require assistance in providing training for your SARs? • Do you need help in ensuring your SARs complete any outstanding training issues e.g. completing CPD points from previous years? • Is there an opportunity for us to coordinate and/or address all current or outstanding training requirements more effectively e.g. communicating directly with the directors of the CAR?

33. Obligations of a CAR for FOFA Record Keeping CARs must ensure that complete records of all advice provided by SARs are kept, including details of any discussions, marketing material, FSGs and PDS’ provided. • Regulatory Attention – ASIC currently focuses their attention on record keeping requirements. • Revenue Protection – having good records is easier to defend complaints against any SAR. • Revenue Retention – having good records is important in retaining your current and/or future revenue. How we can assist you • Do you need help with setting up appropriate records management processes/procedures within your business? • Do you have the appropriate technology to retain and retrieve client records? • Would you like further training in client record retention?

34. Obligations of a CAR for FOFA • The ASIC banning of an owner in South Australia and the impact it had on his CAR.

35. Benefits of a CAR • Ability to brand the CAR’s business collateral, e.g. stationery and marketing to provide financial services as a group. • The use of a company structure may allow for the implementation of effective tax structures. • The potential to create a network of advisers who provide compliant quality advice. • Subject to effective and appropriate agreements, SARs can share the responsibilities for client servicing and quality advice. • A CAR may create multiple referral sources due to its size and scale. A tripartite agreement between Futuro, the Referral Party and the CAR is recommended.

36. Adviser profiles • We are looking at the way you use your Adviser Bio • What feedback do you have for our current format/layout/content?

37. POA/Executor Conflicts of Interest QAF 2.1 Acting as a Power of Attorney for a client or acting as a trustee or executor • You must not act as executor, trustee, court appointed trustee or under a power of attorney (whether this is in a limited or enduring capacity) in any capacity while you are an Adviser/Planner of the Licensee. However, there is an exemption to this prohibition that is detailed further below. • Acting as an Adviser/Planner and as an executor, trustee, court appointed trustee or under a power of attorney creates a significant conflict of interest and therefore it is prohibited by the Licensee. • If a client asks you to be their executor, trustee, court appointed trustee or attorney under a power of attorney; you must inform them that they must have another person external to your practice or firm to perform that role so that you are not in a conflicted position. Professional Indemnity Impacts • If you act for a client as an Adviser/Planner and as an executor, trustee, and court appointed trustee or under a power of attorney it is unlikely that your professional indemnity insurance will cover you should a claim be made against you.

38. Summary • Day in the life of a financial adviser

39. Futuro Financial Services ABN 30 085 870 015 AFSL 238478 Disclaimer This is general advice only. It does not take into account an individual's objectives, financial situation or needs, which are necessary considerations before making any investment decision. Opinions constitute our judgment at the time of issue and are subject to change. This report was prepared by Futuro Financial Services for the sole use of the intended recipient. Its contents should not be disclosed, in whole or in part, to any other party without prior consent in each case. To the extent permitted by law, Futuro, its employees, consultants, advisers, officers and authorised representatives are not liable for any loss or damage arising as a result of any reliance placed on the contents of this report. Please contact us directly should you have any queries in relation to the information provided in this Report on 07 3018 0400.