Scaled back accounting ethics standards now permit the charging of asset-based fees under certain conditions, a move which has been welcomed by accounting and advice firm Chan & Naylor.
The Accounting Professional and Ethical Standards Board (APESB) has undergone a long consultation process on its new APES 230 ethical standards for members, which has drawn criticism from many parts of the industry for being too onerous and restrictive in some areas.
In particular, the Institute of Public Accountants has been a particularly vocal opponent of a proposed total ban on commissions and asset-based fees.
The APESB recently moved back the implementation date from 1 July 2013 to 1 Jul 2014 following further submissions from key accounting bodies, with an updated version of APES 230 to be considered at a board meeting this Friday.
A copy of the new guidance, obtained by InvestorDaily, allows for asset-based remuneration paid to adviser members by third parties, on the condition that advisers obtain prior written informed consent from clients and provide an annual disclosure to the client of the estimated amount of third party payments received.
They will also need to disclose three comparative quotes, where available, for financial planning advice on new contracts for life insurance and other risk products and the procurement of new loans.
Where applicable, members must also disclose to the client the impact of any proposed changes to existing life insurance and other risk contracts and loans, the guidance stated.
The guidance also states that contracts entered into prior to 1 July 2014 will not be affected as long as the member doesn’t provide further planning services on those contracts – suggesting any additional services on existing contracts may serve to cancel grandfathering allowances.
Chan & Naylor director Ken Raiss told InvestorDaily that a total ban on asset-based fees would have had the potential to reduce the number of people seeking advice.
“People can be scared off by upfront fees, it would have put a lot of clients off,” he said.
“FOFA was good because it meant that professionals would have to legitimise their fees by advising what a client was going to get for it, but anecdotally I saw a number of people not going to get proper advice because of the concern of having to pay for it.”
Mr Raiss said the idea of having advice fees paid from a third party was not bad so long as the client was informed as to what services they are going to receive and how those services will be paid for, and at what price.
Mr Raiss described the scaled back approach as “win win”.
