Phil Anderson wants to see Code of Ethics fixed in 2023

Four years after the release of the Financial Planners and Advisers Code of Ethics, the CEO of the Association of Financial Advisers (AFA) voiced the grievances shared by many advisers in a lengthy article posted on LinkedIn on Saturday.

“It would have been ideal if the entire profession had been able to get behind the code back in 2019 and fully support it. That would have been a really important outcome and given us all a level of focus and direction for the future. That, unfortunately, was not the outcome and it remains the case today,” Mr Anderson wrote.

Much of the dissatisfaction with the Code, he said, has been directed at the “idealistic”, but “completely impractical” requirement in Standard 3 that “You must not advise, refer or act in any other manner where you have a conflict of interest or duty”.

“We all know that it is impossible to remove all conflicts of interest,” Mr Anderson said.

That, he explained, “would stop a surgeon from recommending an operation and also doing the operation”.

“We also know in financial advice that charging an hourly rate or even a flat fee does not remove all conflicts,” he said.

Mr Anderson highlighted FASEA’s attempt to provide guidance on how to comply with Standard 3 before it eventually undertook a public consultation on the conflict of interest standard, but then ultimately declined to do anything to fix it.

“A number of other stakeholders have complained about Standard 6 and the potential limitations on providing limited or scoped advice, which we believe is a genuine concern,” Mr Anderson said.

Another area of the code that the CEO thinks also needs to be looked at and “simply fails to reflect reality” is the introduction.

“In the first sentence, it talks about financial advisers refocusing from providing commercial services to acting as professionals. I think many advisers would find this offensive and would have in 2019 when it was issued,” Mr Anderson said.

Another sentence that stands out to him is the following: “While the ‘ethos of the market’ legitimises the pursuit of self-interest through the satisfaction of others’ wants, the ethos of “the professions” aims to secure the public good through the subordination of self-interest in favour of serving the interests of others.”

“This reference to the ‘ethos of the market’ and ‘professionals subordinating self-interest’ does not align with reality,” the CEO said.

“I am not sure if the author of this has seen a medical specialist recently. What they charge gives no indication that they have subordinated self-interest,” he opined.

Ultimately, Mr Anderson stated that a “supported and agreed code is important”.

“I fully appreciate that being recognised as a profession bestows certain privileges and obligations on financial advisers, and acting in the interests of clients and considering the interests of the community as a whole are very much central to that,” he said.

“It is important that the Code of Ethics is fixed and that we can all get behind it and encourage a strong emphasis on the behavioural outcomes that it demands. I am sure we would all like to see the Code of Ethics Version 2 designed and delivered in 2023.”

Treasury is expected to consult on the code next year.