The industry has expressed its disappointment following the decision to retain a ban on third party payments and commissions for life insurance as part of the APES 230 guidelines for accountants who provide financial advice services.
On Friday 16 November, the Accounting Professional and Ethical Standards (APES) Board announced its response to the more than 160 industry submissions regarding the Standard, saying it would make minimal changes to the original proposal (see: APES 230 Decision – Risk Commissions Will Be Banned). Some concessions were offered in the form of transitional arrangements for life insurance commissions, but overall the APES Board was unwaivering in its position regarding professional remuneration models.
The Association of Financial Advisers (AFA) said while it was pleased to have been involved in the APES 230 consultation process, the Association was disappointed that its feedback, along with that of others, did not appear to have been reflected in the final position.
“At this stage, I think there is still some uncertainty as to how this will work,” said AFA COO, Phil Anderson. “The permitting of trail commissions is positive, however it will only last for a limited time given that no further services are permitted. This may limit the provision of further advice, which may not be in the interests of clients. As opposed to FoFA, there is no genuine grandfathering under APES 230. All transitional arrangements cease by 1 July 2018.”
APES 230 will also have significant impact upon licensees who have advisers who are also accountants
Mr Anderson said the impacts of the Standard would be widespread: “With respect to life insurance we expect APES 230 to have a significant impact on advisers who are also accountants and who are active in the insurance market. On a broader perspective, the implications with respect to a ban on volume and ongoing referral fees will have a significant impact on advisers who work with accountants. APES 230 will also have significant impact upon licensees who have advisers who are also accountants. We expect that they will need to work through a large number of issues with respect to systems and processes.”
Speaking to riskinfo early this week, the Financial Planning Association’s (FPA) CEO, Mark Rantall, agreed that the Standard may be difficult to implement.
“We generally support having higher standards and removing conflicted remuneration. But certainly the research we have done with our members who are also accountants has indicated that they will have some difficulty implementing these standards,” Mr Rantall said.
This research, which was conducted among members of the FPA as part of the Association’s submission to the APES Board, found that 76% of respondents believed that the transition timeframe was not long enough, and nearly one-third were concerned that the costs to implement APES 230 would be significant, or not viable.
In relation to the ban on third party payments, 76% of the FPA’s members said they had a business connection (including joint ventures, employment and/or referral arrangements) with an accounting firm, suggesting the impact of the ban could be widespread.
“Everybody is going to need time to assess the ramifications of these changes and how broad the impact will be,” said Mr Rantall. “Our members have indicated they need to have a close look at it, in particular where they have referral arrangements in place with accountants.”
While transitional arrangements and minor concessions are welcome, we still believe the Standard will not be in the best interests of our members
The Institute of Public Accountants (IPA), having previously indicated its opposition to APES 230, issued a statement on Sunday 18 November, saying it was disappointed the APES Board had not made substantive changes to the proposed Standard.
“While transitional arrangements and minor concessions are welcome, we still believe the Standard will not be in the best interests of our members, the accounting profession and importantly, not in the best interests of consumers,” said IPA chief executive officer, Andrew Conway.
Mr Conway confirmed that the IPA would issue a pronouncement to replace the APES 230 Standard, which would be consistent with the requirements dictated by the Future of Financial Advice (FoFA) reforms.
“This will ensure our members are able to continue to provide high quality affordable advice to their clients,” said Mr Conway.
