Advice remuneration structure for accountants under review
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The code of practice governing financial advice, including remuneration, for members of the three peak accountancy bodies in Australia is under review.
The ‘APS 12 Statement of Financial Advisory Service Standards’ governs the professional standards for the members of CPA Australia, the Institute of Chartered Accountants and the Institute of Accountants (NIA).
The review is being conducted by the Accounting Professional Ethical Standards Board, an independent body formed to oversee the professional standards of the three accounting bodies.
Its ambit includes a review of standards for member remuneration, determination of fees and receipt of fees disclosure and reporting fees as well as non-cash and alternative remuneration.
CPA Australia super policy adviser Michael Davison said he expects the review would not result in “significant changes” to the remuneration component of the APS, which was introduced in 2005.
“We believe in the best practice principle underpinning the APS 12 for the past five years, and that is that our members charge clients a fee for service.
“Best practice requires the adviser and client must reach agreement as to what the fees are going to be and, more importantly, there must be a clear link between the fee and the advice.
“The agreed fee must reflect the value of the work,” he said.
Once those criteria have been determined and disclosed, how this fee is actually paid is secondary in terms of best practice under the APS, Davison said.
“As long as what has been paid reflects the work being done, we don’t have a problem if they agree whether it is an upfront fee or a fee deducted from a product or paid by a commission.
“Best practice allows advisers to cover an upfront fee and a trail once they have agreed what the fees are and they reflect the cost of advice; the trail is the collection mechanism for payment of that fee.
“(The APS) doesn’t take a view that commissions as a form of adviser remuneration are bad in themselves or should be banned,” he said.
Davison expected that the APS 12 review would see “tightening” of soft dollar and other alternative remuneration benefits, a move they have already expressed support for.
“There should not be any remuneration incentives that aren’t directly linked to what has been agreed to by the client and adviser,” he said.
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