CPA/ICA issue standards for financial planners
A new set of professional conduct standards for financial planners has been launched by the Institute of Chartered Accountants (ICA) and CPA Australia.
The Statement of Financial Advisory Service Standards (SFASS), also referred to as the APS 12 statement, will come into effect on November 1, following a consultation period among members of both bodies, industry regulators and stakeholders.
Buyer of last resort arrangements that have a product bias have been disallowed, and some soft dollar payments, such as overseas trips that include no educational content and volume-based payments, have been banned outright.
According to CPA Australia financial planning manager Chris Benson, the CPA “ideally would have liked to take a hard line against all soft dollar payments, but decided to take a more pragmatic approach and create standards in line with those in the industry”.
The standards require that all financial planners issue clients with a terms of engagement letter, which clearly outlines their fee structure, timeframes and deliverables.
In addition, there is an obligation to demonstrate “professional independence”. Benson says the definition of independence is less stringent than the definition within the Corporations Act.
“Financial planners need to show that they have independence of mind, and can’t be biased by external forces, and are independent in appearance — they have to show that they are acting in the client’s best interests.”
Financial planning members of the ICA and CPA will be required to undergo an audit every five years to ensure their business meets the SFASS.
Individuals who are found to have contravened the standards could receive sanctions, fines or expulsion from the association.
The CPA currently has over 3,000 financial planners as members, who are also qualified accountants and more likely to offer fee-for-service arrangements.
Benson said the standards were prompted by the introduction of the Financial Services Reform Act, and requests from members who felt that a set of standards for financial planners was “overdue”.
He added that the body “needs to provide a mix of services for members, and wants to promote CPAs as the professional end of the [financial advice] market”.
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