The blanket ban on commissions in insurance will cause members of the major Australian professional accounting bodies to reconsider their membership if it begins to outweigh client benefits, an industry executive said.
The Accounting Professional & Ethical Standards Board (APES) 230 sets the standard for the provision of quality and ethical financial planning services for its members.
However, a controversial aspect of APES 230 was the banning of all product commissions, including insurance and mortgages.
"CPA Australia and Institute of Chartered Accountants Australia (ICCA) have made a prudent decision in removing any sort of percentage commissions out of a remuneration option for CPA and ICAA members," Chan & Naylor director of financial planning David Hasib told InvestorDaily.
"But this particular blanket policy should not apply to every financial services product, in particular life insurance, as it may inadvertently mean they do not act in the best interest of a client.
Hasib said accountants would seriously consider leaving their association membership if the benefits of being part of that association outweighed the benefits of their clients.
The standard would result in insurance becoming an expensive exercise for clients, in addition to business costs.
CPA and ICCA should reconsider the ban on commissions on personal insurance advice, Hasib said.
"Besides the fact that Australians are chronically underinsured, applying a fee-for-service model to an insurance contract makes it quite an expensive exercise and puts another barrier of entry for mums and dads to consider insurance.
"All professionals need to charge for their time; the time it takes to discuss, recommend and implement a very good risk portfolio to a client takes a number of hours. If you're charging $200-300 an hour on top of the premium that the client pays to the insurer, you can imagine that the costs knock out a couple of people out of that equation."
