Accounting fee-for-service won’t work for financial planning

The Financial Planning Association (FPA) has urged the Accounting Professional and Ethical Standards Board (APESB) that financial planners are currently heavily burdened by regulatory change and are in poor position to deal with plans to limit remuneration to fee-for-service.

What is more, the FPA has asserted the accounting fee for service model is not transferable to financial planning.

In a submission filed with the APESB, the FPA has pointed to the range of issues currently confronting planners, and warned that any move by the accounting body to limit remuneration to fee for service would “have a significant impact on the profession at this time”.

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“The industry would not currently be in a position to fund such a drastic change in policy,” the FPA said.

On that basis, the FPA submission said it would encourage the APESB “to focus on access to advice for consumers”.

“Limiting remuneration to a fee-for-service basis, could cut off remuneration options that make advice accessible and affordable to consumers,” it said.

“There is also a strong need to understand the difference between accounting services and businesses, and financial planning services and businesses,” the FPA submission said. “Accountants’ services are more transactional in nature and are limited to tax matters. Financial planning businesses can manage millions of dollars for their clients – the larger the client portfolio, the more time is needed to appropriately service the client, and the higher the risk of things going wrong.”

It said financial planners needed to have the ability to charge an appropriate fee commensurate to the risk, size and complexity of the client.

“All financial planning fees are required to be offered to and accepted by the client, and it is a legal requirement to ensure they are in the best interests and appropriate for the client,” the FPA submission said. “This client engagement and choice is vital. An accounting fee-for-service model is not transferrable to financial planning. They are different services and business models.”

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Finally the FPA taking a stance to defend its members and their businesses!

Entirely agree with FPA position on this matter. The broader issue for the industry is helping the consumer understand the value of advice and making that advice accessible and affordable through fintech. In most cases fee for service models prevent those that need advice from seeking it. Independent advice where rebating commissions to then charge a fee for service instead generally puts the client in a worse financial position and could be seen to conflict with Best Interests Duty. Rebated fees and commissions actually increase the recipient's taxable income too.

The awnser is not pushing people to robo advice as you allude to, its actually servicing a smaller book of clients in a better way, this empire building look after everyone and put the c and d clients on the robot advice is a failing business plan, and a very lazy way to do business. Richard before you have a go at the true independants, you know the ones that rebate commission and charge a fee for the work they actually do, just realise they are the ones trying to change the perception of this industry, the perception that commission cowboys and fum hungry monsters ruined due to lazy work practises and greediness.

Thanks TJ. Big Difference between fintech and robo advice. Robo product flog will always be garbage as it is not the strategic advice solution good fintech can promote. I do agree with some of your statements but keep in mind not all independent advisers represent quality advice or advocate improvement for our industry. Nor do all advisers receiving commissions flog to get a paycheck. The balancing act is good advice for a reasonable price to benefit the consumer. Happy Friday.

I can agree with that Richard, it does get down to how the client wants to pay, there needs to be a balance thats for sure. I have found this is depending on what clients you are targeting and how you can explain the value of your advice, this is a major pointer as to how you charge imo. For example 5 years ago I wouldnt be comfortable offering fee for service but now I am, I have a ok client base now too, so I dont chase the dollars so can take a few nos if you get my drift. Maybe I dont understand the difference between robo advice and fintech as I dont use any of it I leave it to others, I will do some more research though, thank you.....anyway you too have a nice weekend.

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