The APES 230 ethical standards may cause a small number of accountants "some commercial pain", but it will benefit the majority in the long run, according to Robert MC Brown.
Brown, who is a former financial planner and chartered accountant, said the proposed ethical standards would ensure that accountants who engage in financial planning do so "in a manner that is expected of a true profession".
"APES 230 will lead to substantial growth in the number of accountants involved in financial planning, and that can only be good for the industry and its aspiration to be treated as a profession," said Brown.
The proposed standards will prohibit accountants from charging asset-based fees for financial services or receiving third-party fees (such as commissions on risk business).
Premium Wealth Management managing director Paul Harding-Davis believes the standards will end up making it harder for Australians to receive advice about insurance, inevitably exacerbating the underinsurance problem.
While he acknowledged that insurance premiums would drop if commissions were removed, Harding-Davis said clients would not pay an hourly fee to get help putting their insurance in place.
"All I see is that the elite will continue to afford it and will happily take the discount on the premium and cut a cheque. And the average Australian will get less advice on insurance and, [as a result], less insurance," he said.
But Brown rejected the idea that commission on risk products was the answer to the underinsurance problem.
"If commission is the answer, why hasn't it solved it already? It's been the remuneration of choice for 100 years," he said.*
Brown also pointed out that APES230 does not mandate the use of hourly fees, and acknowledged they can be inefficient.
"But they do not result in fundamental conflicts of interest that lead to the inappropriate sale of products or accumulation of funds under management. To overcome perceived inefficiencies with hourly rates, [accounting body] members should adopt flat fees," he said.
* Correction: The original version of this article incorrectly quoted Robert MC Brown as saying "why hasn't it sold it already?".
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