After two years in the making, the Financial Planning Association has decided on the “essence” of its new conflicts of interest principles.

Chairman Corinna Dieters says the main features of the principles are the separation of advice, administration and product fees; there is no preferential remuneration between the licensee and representatives; financial planners will not recommend products that have the potential to bring the industry into disrepute; and separate corporate governance must be in place between an advisory group and any related party.

The new principles eliminate older principles covering preferential remuneration on certain products where the adviser is paid more for recommending “in-house” products and preferential awarding of equity.

The next step for the association is to consult with members and other industry bodies and the Australian Securities and Investments Commission to determine implementation dates and transition arrangements.

Ms Dieters says the move will allow clients and planners to agree the cost of the advice and how it will be paid and how planners will collect their fees.

“Clients can decide with their professional financial planner if they would like to pay advice fees on an upfront or deferred basis,” she said. “The clients and the planner can then decide on how the planner will collect payment.

“Any fees deducted from products will need to be disclosed and agreed between the client and planner, so they may be ‘switched’ on or off subject only to that agreement.”