TICKY FULLERTON, PRESENTER: Now, the battle to rid the financial planning industry of conflicted payment methods has received a major setback today.

The body that sets accounting standards has caved in to pressure from its own members.

In an 11th-hour backflip, the Accounting Professional and Ethical Standards Board now says payments should continue to be allowed.

I'm joined in the studio by our chief reporter Andrew Robertson and this must surely be the most enormous blow to the reputation of the whole accounting profession?

ANDREW ROBERTSON, FINANCIAL REPORTER: Well it actually is, Ticky. Accountants, and particularly chartered accountants and CPAs are very highly qualified and see themselves as a profession. As such their standard setting board has spent the last five years developing a new standard, which goes much further than the Government's mandated future of financial advice reforms, which people see as just a minimum standard.

The reason is, conflicted type commission payments have been at the heart of all financial planning scandals such as Storm Financial, West Point and so on and so forth. The accounting standards board up until last year wanted to ban all commission type fees including percentage funds under management. It also wanted to ban third party payments to financial planners and soft dollar commissions.

At last year's draft standard the board argued no safeguards could reduce this threat of self interest to and acceptable level. However in today's proposal, that's been considerably watered down.

What today's proposal now says in relation to percentage of funds under management as well as third party payments is the first alternative is to remunerated on a fee for service basis, as the board initially proposed.

The second alternative allows percentage of funds under management payments and third party payments as long as there's lots of disclosure. In other words, the body that sets standards for accountants has been rolled and as history tells us, conflicted payments, no matter how much disclosure there is, can lead to unethical conduct.

TICKY FULLERTON: So what does this say about the independence of the - I've got to get this right - of the Accounting Professional and Ethical Standards Board and indeed the independence of accountants generally?

ANDREW ROBERTSON: To say there's a gravy train of commission payments is an understatement and to wean financial planners off this gravy train is proving exceptionally difficult, and accountant financial planners who are wedded to those sort of payments are congratulating the standards board for backing down.

But from the outside looking in, it does look like the three accounting bodies call the tune. They fund the board and in the most controversial issue since the board was founded five years ago it's actually the board that's doing all the backing down.

Now, in fairness, the chairman of the Accounting Professional and Ethical Standards Board told me this afternoon that the board must be in touch with its members when setting standards. Taken another way, that could be an admission that they were out of touch in trying to get rid of these conflicted payments.

What that means for accountant financial planners is they've actively chosen to reject higher standards to get rid of these payments and to be seen to be different.

TICKY FULLERTON: So if this revised payment standard is then adopted, what does it mean for people getting financial advice?

ANDREW ROBERTSON: Well, the issue is, Ticky, when you go to see a financial planner who are they working for? Are they working for you, are they working for themselves? Can you trust them?

TICKY FULLERTON: Should they be asking? (laughs).

ANDREW ROBERTSON: Absolutely. And as the accounting Professional and Ethical Standards Board said last year in its explanation of its original proposed standard, with asset based fees such as percentage of funds under management it's in the member's best financial interests, that's the accountant's best financial interest, to sell more product to the client or to increase funds under management when the best option for the client may be an alternative such as to use surplus funds to repay existing debt.

So when you go to a financial planner, you know, if they know that they're going to get more money the more money you have in their fund, will they tell you to take the money out of the fund and pay your house off? The majority of accountant financial planners have decided they want to stay in the murky world rather than rise above it.

As one accountant said to me the other day, "can you manage an auditor having audited the books of a big company and then demanding a percentage of that company's assets for that auditing work?" I don't think so.

TICKY FULLERTON: What an extraordinary - the financial decision will be made on Friday, at what promises to be a very interesting meeting of the Accounting Professional and Ethics Standards Board.

ANDREW ROBERTSON: Certainly does. Now I am told, some people believe in a wider accounting community outside financial planning, there's a silent majority in favour of these tougher new standards. Well this week is the week to stand up and be counted.

TICKY FULLERTON: Go the silent majority, Andrew Robertson thanks very much for joining us.

ANDREW ROBERTSON: Thanks, Ticky.