While the focus for a large number of accountants at the moment is ensuring they have a solution for the removal of the accountants’ exemption, it is also important that they think about how they will meet their professional obligations when providing financial advice. Accountants providing financial advice are not only subject to legislative requirements enforced by ASIC, they are also subject to the requirements of the Accounting Professional and Ethical Standard APES 230. This standard sets higher obligations than those required under the legislation. Accountants moving into financial advice need to think about how they will meet these requirements. Practically, the requirements have the following implications for accountants:
- Internal policies and procedures should reflect the APES 230 requirements which impact areas such as client engagement, documentation of advice, fee charging models and ongoing fee disclosure.
- Advice documents, including Financial Services Guides, Statements of Advice, Financial Needs Analysis and the Authority to Proceed, need to be updated to reflect the requirements. This includes outlining that the advice has been prepared in accordance with the requirements, and obtaining evidence that ‘informed consent’ has been obtained from the clients where asset based fees or commissions are being charged.
- Managing fee disclosure requirements where asset based fees are charged or third party payments (i.e. commissions) are received. In these scenarios, accountants will need to provide their clients with an annual disclosure outlining the details of the payments. In addition, where asset based fees are being charged, the accountant will need to ensure they obtain their client’s consent every two years to continue charging under this method.
- The definition of financial advice is broader under APES 230 and also applies to credit services provided to clients. Any documents, policies and procedures relating to credit services will also need to be updated.
While the fee disclosure requirements will only be applicable to those accountants providing product advice (as they are unlikely to charge asset based fees or commissions for strategic advice), there is significant work and effort involved in meeting these obligations. A manual process has risks and challenges in ensuring that the obligations are met including disclosures sent within the required timeframes and tracking consent from clients. For this reason, a more automated process is optimal, but also takes time, effort and the appropriate systems to achieve. This will include matching client data with fee / commission data and having the ability to manage work flow through an integrated system. When determining their licensing solution, accountants would be wise to think about how they will meet these obligations. If accountants are looking at self-licensing, they will need to put in place policies and systems which meet both their ASIC and APES 230 obligations. For accountants looking at obtaining an authorisation through an Australian Financial Services Licensee, they should check what support their licensee will provide them in meeting all of their requirements, both legislative and professional.
David Lane is the chief executive officer of Count Financial Limited.
David is also a Judge in the No More Practice Transformation Series and is featured in the No More Practice 30 Day Business Challenge.
