CPA supports advice-based fee model
Following in the footsteps of the Financial Planning Association (FPA), CPA Australia has encouraged the industry to implement an advice-based fee model as remuneration.
The CPA said advisers and clients should first agree on a fee and then discuss a payment method.
This is a similar concept to that outlined in the FPA’s “Principals to Mange Conflicts of Interest”, which is to become part of the association’s professional standards on July 1, 2006.
According to the CPA, factors that should be considered in the determination of fees include hours worked, client requirements, statutory duties, expertise levels, responsibility required, risks associated and any agreed fee basis.
The CPA stressed the importance of clearly advising the client on the cost, which should reflect value, before commencing work.
For this reason, the CPA prohibits discounted fees for initial engagements where the intention is to recover costs through higher fees at a later stage.
CPA financial planning technical adviser Belinda Robinson said the group was a firm advocate of a fee-for-service approach to determining client fees, as this was considered to be more consistent with the principles of professional independence.
The other factor in this form of remuneration is how the fee will be paid.
According to the CPA, commissions are one possible payment method, but there are many other combinations.
It also said that when a commission was higher than the agreed fee, a rebate should be provided to the client.
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