The Accounting Professional and Ethical Standards (APES) Board has voted unanimously to implement the revised remuneration arrangements proposed in an updated version of the controversial APES 230 Standard.
APES 230, which sets out the requirements for accountants who deliver financial planning advice to their clients, was released on Friday 5 April, after more than five years of public and industry consultation. The original APES 230 proposal, which controversially included a ban on risk commissions, was amended this month to allow accountants to continue to charge commissions and/or asset based fees (see: APES 230 – Risk Commission Back Down). The amended version received the unanimous support of the APES Board, who met to discuss the Standard in Melbourne last week.
Under the new standard, where accountants and clients agree to commissions or asset based fees, the accountant will need to obtain informed consent from the client. The APES Board explained that informed consent was an established legal principle, requiring that the client has a clear appreciation and understanding of the relevant facts in relation to the charging for services, as well as the implications of what they are agreeing to.
Accountants wishing to utilise commissions or asset based fees must also comply with what the Board termed ‘stringent procedures designed to safeguard the interests of the client’. For life insurance advice, this includes the provision of three comparative quotes, and ongoing disclosure of the fees charged.
If the safeguards prove to be inadequate, we will readdress the issue of conflicted remuneration in the future
Despite offering the alternative remuneration option outlined above, the APES Board reiterated its position that ‘fee for service’ was its preferred model.
“The Board strongly recommends to professional accountants that clients be charged on a fee for service basis for financial planning services to minimise the opportunity for conflicts of interest,” said APES Board Chair, Kate Spargo.
Ms Spargo said the Board would continue to monitor and review the alternative remuneration methods of asset based fees and commissions to evaluate their effectiveness in practice.
“If the safeguards prove to be inadequate, we will readdress the issue of conflicted remuneration in the future,” she said.
Accountants will need to comply with the majority of the new Standard from 1 July 2014, however, the new remuneration provisions do not take effect until 1 July 2015. The Board said that the timeframe should allow members sufficient time to adapt their business practices and for the professional bodies governed by the Standard to conduct training for their members. APES 230 applies to members of the Institute of Chartered Accountants Australia, and CPA Australia.
Click here to view the APES 230 Standard.
