Sent: 17-08-2010 11:44:07
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The Future of Financial Advice
There is much discussion in the media - both mainstream and industry based - about the draft remuneration standards for financial advisory services issued by the Accounting Professional & Ethical Standards Board.
If this draft standard is finalised, and hence applies to all financial advising accountants, then I think in years to come the standard might be seen as being a catalyst for a very different financial advise industry.
Before explaining why, it's important to understand what the APESB actually is. It was established by the ICAA and CPAs in 2006. Later that year the NIA joined.
The purpose of the APESB is to issue "standards that outline the responsibilities of professional accountants to act professionally and ethically when they are performing their role ... APESB standards are applicable to and mandatory for all members of the Australian professional accounting bodies. This includes accountants working in accounting firms (of all sizes), the corporate sector and in government."
The draft standard permits a fee for service only from 1 July 2011. A fee for service specifically excludes percentage based asset fees or remuneration that has any reference to product sales or the accumulation of funds under management where these are paid either by a client or product manufacturer. Commissions of all types are specifically banned.
The standard would cover all financial products (as defined in the Corporations Act) as well as all borrowing arrangements. It also covers areas not requiring an AFSL such as real estate and non-financial product related advice.
In case you have missed what this means, this standard would apply to risk and general insurance products.
Perhaps most importantly the standard demands that accountants provide financial advice taking into account the public interest.
Media reports are alleging that some businesses are actively fighting against this new standard.
This is not unreasonable from the business perspective. Quite a few businesses are structured around current industry practises and the long-term value, perhaps even viability in some cases, might be threatened if the draft standard is finalised.
The reason why I think this standard has the potential to remake the financial advice industry is obvious.
This standard makes the Government's Future of Financial Advice changes largely obsolete and unnecessary. It has the same impact on the Coalition's current objection to the FoFA proposals.
Has the age of industry self-regulation finally arrived?
It would be impossible to run a financial advice business with two remuneration models - one for accountants and another for non-accountants.
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This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.