The disputed conflict of payment regarding the quality of accountant financial advice is being tended to. The Accounting Professional and Ethical Standards Board present an “update on the royal commission and impact on financial services.”
Financial planning is being offered higher standards as a profession, and the following are Commissioner Hayne’s recommendations to be rid of the prevalent disregard for conflicted remuneration.
Recommendation 2.1 – Annual renewal and payment
Changes will require a financial advisor in Australia to necessitate renewals every year for existing fee arrangements and record the services and fees provided, both in writing. The advisor will also be accounted for the client’s written permission for any payment made on his or her behalf according to the most recent renewal of fee arrangements.
This recommendation targets transparency between client and advisor, as it keeps track of the advisors transactions and will reveal any third party payments. Financial advisors who have always shown their transactions may be subject to more clerical paperwork, but nevertheless, the proposal evens their playing field with other advisors.
Recommendation 2.2 – Disclosure of lack of independence
A financial advisor in Australia is to present a compulsory written statement that says the reasons why he or she is not independent or unbiased before providing a financial service.
Recommendation 2.3 – Review of measures to improve the quality of advice
Financial services and products will be subject to review, while ASIC will be given additional authority that will prevent consumer harm.
Recommendation 2.4 – Grandfathered commissions
This specifically targets the “grandfathering” conflicted payments that have been in place for over five years. The government claims it will prevent clients being rooted to old merchandise and lead them to avail newer and more affordable products that are available.
This may be seen as an acknowledgement to the Productivity Commission’s report to resolve “grandfathering” practices (Superannuation: Assessing Efficiency and Competitiveness).
Recommendation 2.5 – Life risk insurance commissions
States a review must be conducted to prove whether or not commissions paid to a financial advisor in Australia to persuade a client to purchase a life insurance plan is beneficial or not.
The above-mentioned approach to solving the dispute on conflicted remuneration is only part of the outline presented by the commission to improve the matter.