The Accounting Professional and Ethical Standards Board (APESB) financial planning standard will negatively impact advisers with links to accounting firms, by increasing advice fees and reducing client affordability.

This is the view of Mark Vilo, executive manager of Asteron Life, who claims the standard will ultimately diminish any potential or current revenue stream from an advice practice to accounting firm as a referral incentive, therefore forcing them to significantly restructure their business.

The transitional provisions set by the APES Board are that:

  • Fees for assets under management are to be prohibited.
  • All financial advice product commissions are to be prohibited, including insurance and mortgages.
  • These rules will apply retrospectively (with no grandfathering).

“While we’re still assessing what the full impact of APES 230 will be, the standard treats advisers who partner with accountants more harshly than advisers in the open market when it comes to remuneration for insurance advice,” said Vilo.

“The banning of risk commissions and all third party payments is more severe than FoFA, and it’s alarming that with more than 160 submissions, the APES Board has ignored our industry’s concerns and forged ahead with banning insurance commissions.”

Vilo claims advisers are deeply concerned about the impact APES 230 will have on the future of their business.

“Accountants have long been seen as a trusted adviser by most consumers and hold a strong status in Australian society. However, clients will essentially end up paying more for their insurance advice if they go through an adviser linked with an accounting firm, as they’ll be charged a fee for service from July 1 2016,” he said.

“For those advisers linked with an accounting practice, they face the double-sell of not only the insurance purchase, but also selling the fee for advice, which is to their own, and their client’s, financial detriment by increasing the cost of advice. This will exacerbate the underinsurance problem. Currently, only 5 per cent of Australians have adequate life insurance cover.”

Vilo argues that the standard also creates too much red tape and is not needed with FoFA already in place.

“The government’s consultation process with the industry on FoFA was robust. This engagement resulted in insurance products being identified as unique, and therefore carved out of the requirements for fee-for-service. But in direct contrast, APES 230 suggests commission for risk insurance is conflicted remuneration,” he said.

In its discussions with advisers, Asteron Life said they are considering a number of alternative propositions for their business in the future, including:

  • The business structure of their own entities (i.e. consideration of setting up a separate license);
  • Distancing their accounting practice away from their industry association, and
  • Remuneration structures of advisers who provide risk insurance advice.

18 comments on “APES 230 could harm risk advice industry”

    Would Tony Taggart please confirm that neither he nor his firm have ever received commissions from any product provider? This response will be interesting.



    With respect, my argument is certainly about APES 230. Its about being told by a regulatory body how i can and cant charge my clients for my services, Please elighten me on how my clients interests are better served by charging them a fee rather than receiving a commission? Lets assume for the sake of this argument that they are the same amount, Lets draw the bow even further and assume that i am acting in the best interests of my client and advise on the best value for money insurance policy whcih suits their needs perfectly,even though i cannot be trusted to actually do this? I’m all for “the new world of advice” i really am. That in my view should be a product of market forces not a product of “big brother”. Jim. your point to me appears not to be about changing or challenging my beliefs it was actually about telling me i am arguing about the wrong thing?

    Serge Stanislavski

    I think most advisers would agree that, generally, rebating commissions and instead charging an advice fee for smaller insurance cases would leave the client with a higher overall cost – at least in the first and possibly second year of the policy. If that were the case for a particular client, I would not feel comfortable presenting my fees to them, knowing that they could get exactly the same policy, advice & value with a lower overall cost had I accepted the commission. I’m not serving their best interest in this case but rather the ideals of the APESB.

    If we as a profession are truly serving our clients interest FIRST, then we should be able to exercise some discretion in the remuneration model in order to benefit the client.

    APESB is more concerned with appearing professional and ethical than actually allowing advisers to serve their clients best interest. In my opinion, the truly professional and ethical thing to do in situations similar to that described above; is to accept the commission and lower the clients overall cost while providing the same service and value.

    John Wotherspoon

    The major difference when advising clients about risk insurance without any commission involved in the discussion, is that the whole discussion is more open and relaxed when they realise you’re offering advice and information but not selling anything. It is possible they will under-insure themselves but if so, they will do so knowing the risk they are taking and judging cost vs benefit for better or worse. At its core, we are comparing advice with selling.

      Jamie Forster

      I provide risk recommendations that are based on my client’s individual needs, structure it according to their personal situation and recommend the most appropriate policy for them from all available policies in Australia.

      The fact that I charge commissions does not preclude me from doing that.

      Nor does the fact that I am remunerated based on commission prevent me from having discussions that are open although, due to the topic and personal nature of the discussions they are often not very relaxed. I’m ok with: I remember not feel terribly relaxed when I had my last estate planning discussion with my lawyer. Nor was I very relaxed when I had my last colonscopy. That doesn’t mean my lawyer or my doctor were not professionals.

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