AFAC and APESB launch fresh debate on fiduciary duty
Monday, 19 July 2010 1:35pm
Major accountant-based financial advisory firms including Count Financial, PIS and Securitor have formed a new alliance in response to draft proposals from the accounting ethical standards board banning its members from charging asset-based fees from July next year.
On 30 June, the Accounting Professional & Ethical Standards Board (APESB) issued, as an exposure draft, the Proposed Standard APES 230: Financial Advisory Services, which sets out proposed mandatory requirements for accounting members who provide financial advice.
Under the proposed standard, members of Australia's three major accounting bodies who are financial planners must only charge clients on a ‘legitimate' fee for service basis - meaning no commissions, percentage-based asset fees and production bonuses.
This contrasts with the federal government's proposed new laws which allows percentage-based assets fees, except in products where there's gearing involved.
APESB chairperson Kate Spargo said that the standard is an "exposure draft only" and the board is consulting with members until September 15 to approve the proposed changes. She said they have already spoken with AFAC and would welcome a submission from the new group.
Andrew Gale, chief executive of Count and AFAC spokesperson, said that they will be keeping the Financial Planning Association (FPA) updated with their progress but that AFAC would be a direct representation to address key issues contained in the proposed standard.
"There's a range of issues which are common to accountant-based financial advisers and, in particular, if there are standards being developed by the professional bodies, such as the APESB, we thought a sensible way of responding to that is to have a coordinated and cohesive response on behalf of accountant-based financial advisers rather than do so in a haphazard fashion."
Gale said the main focus of the group is to ensure that new accounting standards affecting financial advisers are consistent with the regulatory developments that the government and the policy makers are running with. For example, APESB has proposed a July 2011 deadline for the banning of commissions while the Future of Financial Advice (FoFA) reforms proposed a July 2012 deadline.
"In the main, we think the way that the government's been through the Ripoll Inquiry and FoFA have been very sound and robust. Therefore, we're keen that the content of any proposals coming through other avenues, such as the APESB, are as aligned as possible with these developments, including the timetable."
APESB has stated the reason they want to ban asset-based fee model is that it is inconsistent with planners/accountants fulfilling their fiduciary duty.
Gale disagrees but said they would rather speak with APESB first and show them new research that found many investors who use financial advisers want choice on how they remunerate their planner.
"In fairness to the APESB, I think we should have that discussion directly with them rather than going through the issues and the arguments on the media front," he said.
Michelle Baltazar, media releases
