APES 230 Financial Planning Services

Objective

APES 230 Financial Planning Services sets out mandatory requirements and guidance for members engaged in the provision of quality and ethical financial planning services. A financial planning service includes advice provided to a client in respect of a client's personal financial affairs specifically related to wealth management, retirement planning, estate planning, risk management and related advice.

Scope and application

APES 230 issued in December 2019, is effective from 1 July 2020 and supersedes APES 230 issued in April 2013. The standard requires members in Australia to adhere to its mandatory requirements. For members outside of Australia, the mandatory requirements of APES 230 must be followed to the extent to which they do not contravene specific requirements of local laws and regulations.

APES 230 sets a new benchmark outlining the professional and ethical requirements for the provision of financial planning and credit advice.

A member of CPA Australia or Chartered Accountants Australia and New Zealand providing a financial planning service is required to comply with the standard.

A financial planning service includes:

• advice on financial products such as shares, managed funds, superannuation, master funds, wrap accounts, margin lending facilities and life insurance carried out pursuant to an Australian Financial Services Licence (AFSL)
• advice and dealing in financial products as defined in section 766C of the Corporations Act 2001
• advice and services related to the procurement of loans and other borrowing arrangements, including credit activities provided pursuant to an Australian Credit Licence (ACL);
• related advice such as taxation, real estate and non-product advice on financial strategies or structures provided as part of the advice under an AFS or ACL.

Importantly, as with all accounting professional and ethical standards APES 230 should be read in conjunction with APES 110 Code of Ethics for Professional Accountants (including Independence standards) and any other relevant professional or legal obligations that may apply.

Best interests of the client

A member providing financial planning advice as defined by APES 230 must act in the best interests of the client (paragraph 3.6). Best Interests of the Client is defined as the obligations in Division 2 of Part 7.7A of the Corporations Act 2001, implemented as part of the Future of Financial Advice reforms.

Members providing advice under an AFS licence are already required to adhere to these obligations when providing retail advice to clients.

Members providing advice under an ACL must be guided by the spirit of these obligations, while recognising that there may be specific elements of the best interests obligations that members are unable to comply with when providing credit advice.

Terms of the financial planning service

In addition to complying with the requirements of APES 305 Terms of Engagement, paragraph 5 of APES 230 requires members to also include in the terms of engagement:

• the identity of the person or the entity responsible for providing the service
• the nature and scope of Financial Planning Services to be provided or offered including any limitations of scope
• any significant factors that affect or may affect the member's ability to provide the service on an objective and independent basis
• information about any actual, potential or perceived conflicts of interest and information about any safeguards implemented to address these conflicts.
• the details of the professional fees, including the basis on which the fees are determined and the services covered by the fees
• information about any actual, potential or perceived conflicts of interest that have the potential to affect the member’s ability to act in the best interests of the client
• where the Member has adopted safeguards to eliminate or reduce to an Acceptable Level any identified conflicts of interest , information about the nature of those safeguards and an explanation of the reasons why the Member considers those safeguards to be effective
• the need for the member to obtain the Client’s informed consent in writing
• information about the nature and extent of any interests, associations or relationships, including family, contractual or agency relationships, whether of a financial nature or otherwise, that have the potential to affect the member’s ability to act in the best interests of the Client.
  
   

Basis for the financial planning advice

Section 6 of APES 230 requires that a member establishes the basis for providing the advice, with specific reference to the information provided or agreed by the client, the scope of the advice and any assumptions used to develop strategies that could meet the client's objectives and needs.

These requirements largely reflect existing obligations for financial advisers when providing financial advice and the responsible lending obligations for members providing credit advice.

Reporting the financial planning advice

Advice provided to a client must be documented and provided to the client in a written form (paragraph 6.8 and 6.9).

The information that is required to be included in the report largely reflects the existing obligations and would usually be satisfied by members providing financial product advice by providing the client a statement of advice (SOA). In addition, there is also a requirement to include a statement that the financial planning advice was provided in accordance with APES 230.

Members providing credit advice could satisfy this requirement through the provision of their credit guide, credit proposal disclosure document and the written assessment that determines that the credit will not be "unsuitable" for the client.

There is scope to combine these documents if you are providing both financial product advice and credit advice. Refer to ASIC Information Sheet 134.

Professional fees and third-party payments

The specific obligations in respect of Professional Fees (section 8) and Third-Party Payments (section 9) require members who charge a professional fee to:

• obtain written informed consent prior to charging and collecting the fee (as part of the terms of engagement)
• provide an annual disclosure of the fees charged and an explanation where this amount has significantly varied from the previously advised fee
• obtain annual written consent to continue to charge and collect the fee on a percentage basis.

Members who will be remunerated via commissions (defined as a Third-Party Payment) must also:

• disclose three comparative quotes, where available, on new contracts for life insurance and other risk products and the procurement of new loans
• disclose on annual basis the amount /estimated amount of third party payments received / to be received
• disclose the impact of any proposed changes to existing life insurance, other risk contracts and loans including the impact on third party payments as a result of recommending changes to these contracts and loans

APES 230 bans soft dollar benefits with a value of more than $300.

Documentation and quality control

There is an obligation that members prepare and retain working papers for the advice and services provided to clients.

This obligation can be satisfied by the development and retention of appropriate documents prepared in the advice process including file notes, FSGs, SOAs, credit guides and written assessments.