In a recent blog post, Justin Brand of Brand Financial said the Accounting Professional and Ethical Standards Board (APESB) states in its code of ethics that commissions create a “threat to objectivity and professional competence”.
Therefore, Mr Brand believes accountants cannot have a client’s best interests in mind when referring them to an adviser whose remuneration is tied to the sale of financial products.
“Given that accountants recognise that commissions ‘create a self-interest threat’ to the client, then knowingly putting a client in a conflicted position cannot be consistent with the accountant’s professional principles, their fiduciary duty or a client’s best interests,” Mr Brand said.
“If you are an accountant, why compromise your clients’ quality of advice and your professional reputation by referring to financial advisers … who can’t meet the same level of professionalism as your practice?
“If you’re an accountant aiming to act in accordance with your fiduciary duty, how do you justify referring your clients to someone whose advice is fundamentally compromised by self-interest?”
Mr Brand said historically accountants had few options, however, the emergence of a vibrant, independent financial advice industry gives them an alternative that better suits their principles.
“Accountants have obligations. More importantly, they now have options,” he said.
What is a commission, when and how this is paid?
Surely this is important in the context of conflict of interest.
This article was a self serving advertorial for independent financial advice. Nothing new about that. The responses then degenerate into the usual slanging match between financial planners and Accountants. Nothing new here. Hopefully one day this rubbish will stop and we will all be working together for the best interests of the client. That would be something new and worth looking forward to.
Great article Justin. I appreciate it’s a provocative headline but yours is a well articulated position that raises an issue that people recognise but have quietly ignored and relegated to the “too hard basket”. What a lot of your critics fail to appreciate is that you are simply identifying the logical conclusion of the Code’s position and the inconsistency between their code and their conduct. The Code states that commission creates conflict and potentially undermines the focus of the advice. Melinda’s point is well made but I don’t think you’re suggesting accountants are stupid and I don’t think that’s a reasonable inference. Personally, I’d recommend you dismiss the views of anyone that lacks the courage to stand behind their opinions.
The greatest conflict in financial services today is accountants who unnecessarily recommend SMSFs for their clients, so that the accountant gets SMSF fund admin fees. Just because the payment method is a fee rather than commission, doesn’t make it any less conflicted or unethical.
Financial planners now have a statutory Best Interests Duty to prevent inappropriate advice, regardless of payment method. Accountants have no such constraints.
Accountants have fiduciary duties. We shouldn’t be celebrating a statutory best interest duty, if the industry had been effectively self regulating it wouldn’t have been necessary
If you flipped this argument around and refused to refer people to accountants because of the commissions they took from agribusiness MIS and the role they currently play in SMSF “advice”, you’d get some kind of ‘but not [i]all[/i] accountants’ response. Cut out the useless sledging – just refer people who you trust personally and whose business model you understand.
Well said.
Self promoting egotistical jabbering, nothing new to see here from Justin. [i]Sigh[/i], why does the IFA magazine have such sensationalist rubbish as ‘news’? To sell their ads of course, it has nothing to do with quality reporting or journalism….
There are so many more quality stories or information out there, like the recent rounds of info seminars throughout QLD by a renowned solicitor firm on their take of the [b]impending super changes come 1 July 2017 and things planners and accountants should be taking into consideration now[/b], but instead we have this ultra conflicted self serving diatribe by a known narrow minded nonsense spinner in our morning ‘news’. Well done IFA, you’ve once again shown us your worth and where your values lie.
Accountants should be referring their clients to advisers who will act in their client’s best interest. Since the accountants know they are responsible in part for their referral, you would assume they also are able to judge with their knowledge and experience who will do a good job for their clients. Or are you implying all accountants are stupid ? That’s a pretty big call don’t you think?
You’ve used the word ‘should’ and then ‘assume’ on your way to suggesting that Justin is implying all accountants are stupid.
By all means tell Justin you think he’s wrong, but attempting to put words in other people’s mouths – that’s downright sleazy Melinda.
I agree that the referral arrangement both ways should be non-financial and, for the end result to be in the best interest of the client.
Like it or not, FP and Accountants SHOULD work hand in hand, (if the Accountant is not authorised for FP). As this gives a complete solution for the client.
This is ridiculous. What is an accountant supposed to do if a client asks for financial advice? Not refer to someone they trust will look after their client? Accountant are acting in clients best interest by advising them to seek professional guidance from a trained, qualified and experienced planner.