The Institute of Public Accountants (IPA) has delivered on its promise to release its own professional standard for the provision of financial advice by its members.
The standard, called ‘Pronouncement 11: Financial Planning Services’, covers elements of the financial advice process such as acting in the best interests of a client, charging for financial advice, and documenting the advice. A draft version of the Pronouncement has been issued by the IPA Board of Directors for consultation.
The IPA first announced its intention to release a ‘Pronouncement’ on financial advice for its members in November 2012, following the release of a draft standard for accountants who provide financial planning services by the Accounting Professional and Ethical Standards Board (APESB) (see: APES 230 Outcome ‘Disappointing’ – Associations). The APESB Standard, known as APES 230, initially proposed a ban on commissions as a form of remuneration for all advice, including life insurance product advice. After significant industry push-back, the APESB agreed to remove the ban on commissions for insurance, along with a small number of other changes requested by key stakeholders.
… we have detected growing anxiety in relation to the additional requirements of APES 230
Despite this change in position, the IPA continued to pursue the development of its own standard, saying the APESB approach to developing guidelines for financial advice had ‘… caused great consternation within the profession and the broader financial advisory sector’.
‘The IPA opposed the original form of APES 230 and has insisted that the imposition of a different regulatory regime to that created through the Future of Financial Advice (FoFA) reform process is unnecessary,’ the accounting body said in its Pronouncement.
‘The IPA was pleased to see the final version of APES 230 addressed many of these concerns. However through our engagement with members and the broader financial advisory sector over recent months, we have detected growing anxiety in relation to the additional requirements of APES 230. This anxiety is centred on the fact that many members and practitioners do not believe the additional requirements imposed by APES 230 above those imposed by FoFA will deliver any benefit to clients and will impose an unnecessary additional administrative burden by way of systems changes to those already imposed by the changes imposed by the statutory reforms.’
Pronouncement 11 contains no specifications as to the type of remuneration model that should be adopted by accountants providing financial advice, but does set out that the fees charged should not compromise the independence of the fundamental responsibilities of members.
“After extensive consultation with our members, the IPA has developed the exposure draft which provides practical alignment with Future of Financial Advice legislation, whilst maintaining the high ethical and professional standards imposed by APESB,” said IPA CEO, Andrew Conway.
If adopted, the Pronouncement would take effect from 1 July 2014, but IPA members are permitted to adopt the principals ahead of this date. Consultation on the Pronouncement closes on 12 August 2013. Click here to view the Pronouncement.
These guidelines are all very good (even though most are just a repetition of what the Law requires) except section 7 – Documenting the Advice. If any IPA member follows this requirement alone they will be in trouble. The ‘report’ must be a Statement of Advice and the Law and ASIC requires specific information to be included in an SoA. Not including that information will mean the document is ‘defective’ and it is an offence to give a defective SoA to a client. Get it right boys and girls.
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