Despite the act giving “the standards body” the ultimate power to set the code of ethics for “relevant providers” in the advice industry, The Fold Legal solicitor and director Simon Carrodus told ifa that it also gave the relevant government minister of the day the power to decide who “the standards body” was.
“The minister has the power to declare any body corporate to be the standards body [based on] section 921X of the Corps Act,” Mr Carrodus said.
“So if FASEA merges with, or is absorbed into, the new disciplinary body, the minister could declare that new body to be the standards body.”
The comments come following a number of industry bodies including the AFA, FPA and SMSF Association coming out in continued opposition to the wording of Standard 3, which states that advisers must not “advise, refer or act in any other manner if you have a conflict of interest or duty”.
Mr Carrodus said from a legal perspective the wording of the standard was “confusing and unworkable”.
“The financial advice profession won’t have any certainty until the wording of Standard 3 is amended. No amount of guidance is going to solve this problem,” he said.
Mr Carrodus said the likelihood of FASEA amending the standard would depend on internal willingness to take on industry feedback, but there would be no additional legislation required for it to change the wording.
“It should not be difficult for FASEA to amend the wording of Standard 3. FASEA has the power to do this pursuant to subsection 921U(2)(b) of the Corporations Act,” he said.
“There may be a few hoops to jump through internally, but it shouldn’t be any more difficult than updating/releasing new guidance.”
However, Mr Carrodus said it was likely the government would look to roll the authority into the disciplinary body, given the confusion keeping the two bodies separate was likely to cause.
“I don’t see any benefit in having two separate bodies. The only guidance that matters is guidance from the body charged with interpreting and enforcing the code,” he said.
“Unfortunately, that body doesn’t exist yet.”
Simon turned out to be on the money but it would be nice to see a more workable version of Standard 3 as conflict of interest is a minefield that I can’t see a product provider who has a ‘commercial salesforce’ (De Ferrari) pass any version of Standard 3 that has any teeth.
Leave Standard 3 as it stands. If you do have a problem with it than you’re out of step with wider community expectations.
I think the principle of standard 3 is great, assists in ensuring we act as professionals. Where there is an issue is in the greyness of the wording, what is a “conflict of interest or duty”?
Agree. The intent is not to say that anything where the client pays you is a conflict of interest. It is pretty easy to understand what a disinterested person would consider a conflict.
The intent is subvert the Corps Act, destroy financial advice, and herd everyone into union controlled products.
You think there is a wider community expectation that all advisers who get paid for their services should have a gun permanently pointed at their head ready for a biased regulator to pull the trigger?
I accept that is the expectation of the narrow political activist community that hijacked the FASEA “consultation” process to reword Standard 3 as it currently stands. But it is far from the expectation of the wider community who favour a fair, balanced,and efficiently functioning society.
You are seriously ill informed.
Good point but any kind of payment to an adviser fails the exact wording of Standard 3 as a disinterested person could reasonably conclude that any kind of payment, hourly, % of assets, annual fixed, etc could reasonably influence the adviser. The explanations move away from this absolutist standard but they are not the law.
Hence the intent is laudable, the execution is shocking. Clearly no expert on conflicts of interests was consulted.
No wonder the government didn’t accept the FPA conglomerates bid to be the code monitoring body. Would have fed straight through to helping their professional partners and the FSC.
And that dreadful CFP designation that doesn’t show anything.
Does that render the “pay to remark it – to make it” FASEA Exam of nil effect? lol
And by the way – It isn’t just standard 3 !
Totes Standards 5 & 6 are completely unworkable in the real world too.
It is becoming increasingly clear that the current unworkable Standard 3 wording was imposed by a core group of political activists and ideological zealots.
When the new SDB is formed these people must not be allowed anywhere near it. Particularly anyone associated with fake “consumer groups” Choice and CALC. These organisations have become political activist groups which no longer represent the real interests of consumers.
Assisted by the FPA
What is a conflict. Someone working for Industry super being asked for advice about a fund they are employed by? A manager talking about their product. A person recommending a client use their services. A group having model portfolios to deliver a more consistent measured outcome to clients like a corporate offering but then is this a conflict? This area has gone too far as anything coudl be arhued as a conflict.