APES 230 changes a 'win-win'

Chan & Naylor director Ken Raiss told ifa a total ban on asset-based fees – which until this week the Accounting Professional and Ethical Standards Board’s (APESB) proposed in its APES 230 standards – would have had the potential to reduce the number of people seeking advice.

“People can be scared off by upfront fees; it would have put a lot of clients off,” he said.

“FOFA was good because it meant that professionals would have to legitimise their fees by advising what a client was going to get for it, but anecdotally, I saw a number of people not going to get proper advice because of the concern of having to pay for it.”

Raiss said the idea of having advice fees paid from a third party was not bad so long as the client was informed as to what services they are going to receive and how those services will be paid for, and at what price.

New proposed guidance reported on by InvestorDaily yesterday would allow asset-based fees, provided advisers meet certain conditions.

Raiss described this compromise as a “win-win” situation.

“It creates a better environment for the investor because they get a wider range of options, a wider range of suppliers, and again under FOFA the adviser must do what is in the client’s bets interests, which is always central to advice,” he said.

“The client wins, the adviser can earn an income and they do it knowing they’ll do what is in the best interests of the clients and have a reasonably broad view of what products were available and which services are in the client’s best interests and why.”