Financial Planners will face tougher conduct guidelines after a new code of practice was issued today, raising the bar on disclosure and urging advisers to give up commission payments.
The two peak accounting bodies – CPA Australia and the Institute of Chartered Accountants – have released a draft of the new guidelines for their financial planning members, clearly signalling that they no longer support commission payments for advisers.
The new guidelines state that while commission payments will be tolerated, the “preference of CPA Australia and the Institute is that members adopt a fee for service approach where possible as this is considered to be more consistent with the principles of professional independence”.
In a similar vein to the joint code of conduct issued by the Financial Planning Association and the Investment and Financial Services Association last year, the accountants’ financial planning code bans all forms of soft dollar commissions that are volume-sales related.
It also bans advisers from receiving free or subsidised office equipment, computer software or conference attendance from third parties.
Other forms of ‘soft dollar remuneration’ worth over $300 will have to be disclosed on a public register.
“Members must act fairly and must not allow prejudice, conflict of interest or bias to override their objectivity,” the codes states.
“When providing financial advice, they must maintain an impartial attitude and recommend solutions that meet the client’s situation.”
In a move that appears to raise the bar on disclosure for planners, the new guidelines also require buyer of last resort agreements to be outlined to clients, with the accounting bodies stating that such arrangements are “often linked to preference for certain products”.
The new code also bans the initial discounting of fees, where advisers plan to recoup funds through subsequent higher fees and commissions.
Members of the associations who do not comply with the rules will face disciplinary proceedings.
CPA Australia chief executive Greg Larsen said in statement today the new standards would “establish a benchmark for advisers”.
ICAA general manager of standards Bill Palmer said the code would improve the professional objectivity of advisers.
