Why APES 230 goes further than FOFA
The trouble with APES 230 is that it goes much further than Future of Financial Advice, with a prohibition on commissions and the elimination of asset-based fee arrangements.
Accountants make up a significant proportion of the Australian financial planning industry, with many choosing to be members of both the Financial Planning Association (FPA) and groups such as CPA Australia and the Institute of Chartered Accountants in Australia.
Indeed, it is a fact of life that while many chartered accountants can and do become financial planners, few financial planners go to the trouble of acquiring the necessary academic qualifications to become chartered accountants.
The degree to which accountants are a part of the fabric of Australian financial planning is indicated by the manner in which many financial planning dealer groups are dominated by accountant members, the most significant being Count Financial.
Perhaps if the Accounting Professional and Ethical Standards Board (APESB) had better understood the degree to which financial planning had become a core source of revenue for large numbers of accountants, it might have reconsidered key elements of its proposed standard APES 230 covering financial advisory services.
Reduced to its essence, the problem with APES 230 is that it goes much further than the Government's Future of Financial Advice changes with a prohibition on commissions – even with respect to insurance and the broking of mortgages – and the elimination of asset-based fee arrangements.
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".
In short, accountants who extract a large portion of their revenue from financial advisory services are going to find themselves having to meet much more exacting standards under APES 230 than financial planners seeking to meet the requirements of the Government's FOFA bills and consequent regulations.
Little wonder, then, that a number of accountants and people such as Count Financial chief executive David Lane have warned that the implementation of APES 230 could generate an exodus from professional accounting bodies such as CPA Australia.
Given the extent of the changes tied up in the Government's FOFA legislation and the manner in which those bills are currently being interpreted by the Australian Securities and Investments Commission (ASIC), there seems little real justification for the accounting bodies unilaterally lifting the bar even higher for their members.
CPA Australia and the other bodies supporting the APESB should listen to their members working at the coal face and accept that the requirements of the FOFA legislation and consequent regulation are enough.
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