The controversial announcement by accounting body CPA Australia that it is establishing an independent (section 923A-compliant) financial planning business is both commendable and curious.
It’s commendable because the initiative publicly demonstrates CPA Australia’s strong support for adoption of the highest ethical standards by members offering financial planning services, as originally proposed by the Accounting Professional and Ethical Standards Board (APESB) in November 2012.
It’s curious because CPA Australia appears to have evolved from the position that it strongly pursued when it was counselling the APESB to back down from its originally undiluted version of the profession’s proposed financial planning ethical standard, designated APES 230.
The result of the counselling process, successfully undertaken in partnership with Chartered Accountants Australia New Zealand (then known as the Institute of Chartered Accountants), is a compromised version of APES 230 which establishes a strange regime of “optional ethics”. This allows members to choose the highest ethical standard in which remuneration-based conflicts of interest (asset fees, commissions, volume payments and similar incentives) are removed; or to choose the widely discredited lower ethical standard in which such conflicts are merely disclosed.
Consistent with APES 230?
In announcing the establishment of its new venture, CPA Australia stated that it will be consistent with the principles in APES 230. How could that be? The answer is simple. While strongly supporting independent and unconflicted financial planning, CPA Australia will not require all of its members to operate in that way, only those licensed through the new venture. That is, adherence to the highest ethical standard is preferred, but remains optional, as in the diluted version of APES 230.
Interestingly, by launching this venture, CPA Australia may be risking the creation of two levels of membership, namely, those who can be trusted to act without the influence of conflicts of interest and those who cannot be so trusted. No doubt, care will be taken to avoid direct or implied criticism of the latter group of members (a very large group indeed) with whom the new venture will be in competition.
The leadership of CPA Australia may even express “agnosticism” about the financial planning business models of its members (as the FPA does about its members’ business models); however, in the final analysis, the message from CPA Australia and from the directors of its new wholly-owned subsidiary will be difficult to avoid. That is, if a member of the public wants to be certain about the ethics and professionalism of a CPA who is offering financial planning services, there is only one choice. It is a message that I wholeheartedly endorse.
Professional bodies in society
At another level, the new venture raises important questions about the role of a professional body in society. These include: Is it appropriate for such a body to offer professional services directly to the public? Should it offer such services in competition with its own members? And ultimately, does this change the nature of CPA Australia?
The announcement also raises the difficult position of Chartered Accountants Australia New Zealand (CAANZ). Clearly, it was taken by surprise and is entitled to be more than a little upset by the unilateral action of its former ally. At the time of writing this story, CAANZ had understandably stated that it does not intend to do a “me too”, although I know that a significant number of chartered accountants would like it to do so.
Commercially, this decision presents CPA Australia with the opportunity to recruit and license new members from the ranks of CAANZ. I note CPA Australia has announced that only CPAs will be considered for licensing by the new venture, but I expect that ways may be found to overcome that problem should the need arise. What an ironic turnaround from 2012 when CPA Australia was suggesting that it would lose hundreds of members if the accounting bodies allowed the undiluted version of APES 230 to go ahead.
Two basic options
CAANZ now has two basic options. The first option is to do nothing. The second option is to re-establish its leadership in the accounting profession by reasserting the support that it originally gave to the principles in the undiluted version of APES 230, before it lost its nerve.
CAANZ (of which I have been a member for more than 35 years) claims to be a professional body, not a special interest lobby group. If the current leaders of CAANZ truly believe that to be so, and they have a clear understanding of the ethical responsibilities and obligations that flow from being a true profession, then they have no other choice than to cease the obfuscation that sadly continues to compromise the public trust of that body and of its members.
In contemplating these issues (and while trying to retain my sense of humour) I was reminded of the wise words of Sir Walter Scott who wrote in 1808: “Oh what a tangled web we weave, when first we practise to deceive.
