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Australia's three professional accounting bodies are in danger of losing members heavily engaged in the financial planning industry over new standards being proposed by the Accounting Professional and Ethical Standards Board (APESB) which move substantially further than Future of Financial Advice (FOFA) standards.
A particular issue of concern for accountants in the planning space is the proposal to prohibit commissions – even with respect to insurance and the broking of mortgages – and the elimination of asset-based fee arrangements.
The chief executive of accountancy-based financial planning dealer group Count Financial, David Lane, has told Money Management that he and many of his group's members are deeply concerned about the long-term implications of the APESB proposals contained in APES 230.
He said the APESB approach had gone above and beyond the improvements contained in FOFA and would make it extremely difficult for accountant/planners to provide the level of services that had become customary in the industry.
"What the APESB has proposed is counterintuitive," Lane said.
According to the APESB announcement around the proposed new arrangements, "members will be prohibited from receiving commissions from third parties and from setting their fees on the basis of conflicted remuneration methods such as a percentage of clients' assets".
It said: "These practices involve conflicts of interest and create threats to members' objectivity and impartiality. Instead, members will be required to set their fees based on the service they provide, taking into account factors such as the scope, scale and complexity of the financial advice and the expertise of the financial planners and their staff".
Lane's concerns were echoed by Premium Wealth Management general manager Paul Harding-Davis who said the APESB proposals had caught many accountant/planners within the group on the back foot.
"They had almost no knowledge of what was being proposed and have been left very concerned by the contents of the APESB proposals contained in APES 230," he said.
Harding-Davis said that if the major accounting groups embraced APES 230 he believed there was a real danger planner/members would seek representation of their interests elsewhere.
Lane agreed with Harding-Davis' analysis, saying that in a number of conversations he had had with members of the Count group, questions had been asked regarding the cost of APES 230 outweighing the value they were gaining from membership of the major accounting groups.
"The majority are against APES 230," he said.
Describing the approach which had been adopted by the APESB, he said he believed it was both "prescriptive" and "paternalistic".
Harding-Davis said the APESB approach to asset-based fees ignored some of the conflicts which could be entailed in hourly billing.
"I think they are guilty of a cognitive dissonance," he said.
