The Labor Party expressed support for the FASEA extension as it passed through the House of Representatives two weeks ago. The bill is currently due to be assessed by the Senate.
The Senate will not sit for another month after this week, if the bill is not assessed by today it will be a while before it could be passed.
The Treasury Laws Amendment (2019 Measures No. 3) Bill amends the Corporations Act to defer the transitional time frames for the FASEA exam and tertiary education requirements.
It would see the transitional time frame for the approved degree or equivalent qualification deferred by two years to 1 January 2026, and the transitional time frame for the FASEA exam deferred by one year to 1 January 2022.
Phil Anderson, general manager of policy and professionalism at the AFA, called the original planned commencement date for the code from 1 January this year “totally unreasonable and impractical”, adding there is still a “high level of uncertainty.”
FASEA issued a guidance around life insurance commissions in December, which stated a number of requirements for advisers, including that their product recommendations are in the best interest of the client; that clients understand benefits, costs and risks; the advice and fee structure are appropriate for the client; and the remuneration would not lead the adviser to prioritise their own interests over the clients’.
Mr Anderson told advisers at the AFA Roadshow this week that while ASIC has given some certainty on its regulation and time frame, there are gaps in FASEA’s policy.
“FASEA have been very clear on saying that you cannot be paid for providing referrals. [But] they have not really answered the question about whether you can pay to receive referrals,” he said.
“And there are lots of businesses that do have models where they receive referrals, they may have an arrangement with an accounting firm, where they get a regular flow of referrals that they pay for. We can’t really see the conflict of interest there, that’s an issue that’s still outstanding.
“I’m making the point that the code only applies to individuals. It does not apply to corporates like licensees or corporate authorised representatives (CARs). So this suggestion is that if the referral fee is received by the licensee or the CAR, and as long as it’s not passed on directly to a financial adviser, then it may not be in breach of the code.
“And that’s a really important point when you think about how you guys need to restructure your business.”
As the life insurance framework has caps on commissions and largely pay the same rates, he added, the issue of conflict is not with the product selected, rather, the level of insurance recommended – because the more coverage recommended, the higher the commission.
Mr Anderson noted recent media coverage of former FASEA director and CountPlus chief executive Matthew Rowe, where he stated that the code’s Standard 3, which mandates that advisers must not advise, refer or act in any other manner where they have a conflict of interest or duty, is “unworkable”.
“I’m pleased that he did, because that’s the point I’ve been making for 12 months,” Mr Anderson said.
“I guess we wish he had made it more clearly and vigorously when he was on the board of FASEA.”
The standard’s viability could be explained away if applied to another industry, he commented, using the political process as an example.
“If Standard 3 applied to politics, then you would not be able to approve a special grant for anyone in your electorate or any electorate you’re aiming to target at the next election. I don’t think this pork barrelling started in the financial advice sector,” Mr Anderson said.
“We all know that politics is based upon doing deals, where conflicts come into play.
“And the reality is complete removal of conflicts is going to be incredibly challenging. And it’s really impractical and it doesn’t work in the best interest of clients.”
As it laid out in its statement in November, ASIC will not be monitoring or enforcing individual advisers with respect to the Code of Ethics, but it will still be required to comply and licensees will need to take reasonable steps to ensure their compliance.
The regulator said it would apply a facility compliance approach for Standard 3 and Standard 7, a rule around remuneration, until its new disciplinary body is in place from 2021.
The AFA has strongly recommended that advisers take note of the ASIC guidance, which Mr Anderson said provided a “very clear message”.
The consultation over the FASEA code is ongoing.
“What we say to advisers is, don’t rush to make important decisions,” Mr Anderson said.
“We have this facility compliance for two key standards. That’s not to say you shouldn’t do anything. You should be carefully reading the code and you should be considering the implications for it, and then start to plan what you may do once you have certainty.”
To date, roughly 20 per cent of advisers have passed the FASEA exam. Around 5,250 individuals have sat the exam, with around 88 per cent passing.
The AFA Roadshow has continued in Brisbane today.
I have written to FASEA requesting and debating this issue of referrals. FASEA advised that they would provide an answer before the end of December 2019. As yet no outcome, guidance or reply has been received. In respect of conflict of interest. Could anyone explain what the conflict of interest is, whether you receive a referral fee or not? An example from a mortgage broker writing a loan for your clients. FASEA have no idea. Is the board related to Kenneth
Hayne.
[color=blue]I’m sorry but this comment I have copied and pasted below REALLY needs to be read more than opnce by everybody – pollies, media and the publis. I would like to PLASTER it all over the halls of parliament. Anyway, for what it is worth, I’m double posting it h[color=blue][/color]ere . . . [/color]VERY WELL SAID BY THE ORIGINAL POSTER
[color=red][b]Do as I Say, Not as[/b][b][/b] I Do hey P 16 hours ago.
Aren’t our Pollies just wonderful in passing bucket loads of Regulations on Financial Advisers and act completely against these rules themselves.
[b]No Pollie has to do a degree[/b][b][/b] – yet they are trying to run the country – kind of an important Job one would think formal education MUST apply. But no.
[b]No Pollie has to do an Ethics course[/b][b][/b] – regardless of past education and experience – becuase we all know how wonderfully Ethical our Pollies are – NOT.
[b]No Pollie has to answer to an ICAC or FOS or AFCA[/b][b][/b] – because they are allowed to be completely wrong, corrupt, and not have to really answer to us the voters, just ask themselves.
[b]No Pollie has to deal with 9.5% Super Guarantee[/b][b][/b][i][/i][i][/i] & Stupid ever changing rules – As they have their own you butte Lifetime Defined Benefit Super Scheme so they don’t even have to understand the rules for the rest of the country, they just make the rules as complicated as possible and change them as often as possible.
[b]No Pollie has to deal with a completely unworkable Code of Ethics[/b][b][/b] – most Pollies don’t have any Ethics so of course they dont have to follow an Ethical code – that has been completely rushed, that sits far and away above corporations law in its reach and is completely useless in the re[color=red][/color]al world.[/color]
Why are the AFA and others continually perpetuating the myth that ASIC will take a ‘facilitative’ approach with the Code of Ethics? They only said it was in relation to inadvertent breaches.
If a licensee is passing through commissions and asset-based fees every month, to dozens of advisers, that’s not inadvertent! That’s a systemic breach.
If someone can’t talk sense into the numbskulls at FASEA, huge numbers of self-employed businesses will be screwed. Rather than pushing back the exam and education requirements, Hume needs to step in immediately to prevent a disaster. It’s time for the board to be reshaped, with a majority of experienced, practicing adviers. The current mob have shown themselves to be incapable of understanding, listening to or engaging with practicing advisers.
If “All advisers” comment below can get through the editors grip today, then mine should.
I’m so absolutely pissed with the lack of right and wrong awareness portrayed by two-faced, self serving politicians, regulators who set agendas and then manipulate processes to justify their predetermined agendas and FASEA Board Members with their own shocking conflicts of interest getting away with what they’re all doing.
Everything these ‘so-called geniuses’ say they’re setting out to achieve (i.e. better consumer outcomes) is in fact, the opposite of what we’re actually seeing now – yet the charade continues. Its a disgrace.
This Code of Ethics ambiguity and total confusion is yet another example. Like ‘All Advisers’ says below…this industry is totally f*^#ed.
Aren’t our Pollies just wonderful in passing bucket loads of Regulations on Financial Advisers and act completely against these rules themselves.
[b]No Pollie has to do a degree[/b][b][/b] – yet they are trying to run the country – kind of an important Job one would think formal education MUST apply. But no.
[b]No Pollie has to do an Ethics course[/b][b][/b] – regardless of past education and experience – becuase we all know how wonderfully Ethical our Pollies are – NOT.
[b]No Pollie has to answer to an ICAC or FOS or AFCA[/b][b][/b] – because they are allowed to be completely wrong, corrupt, and not have to really answer to us the voters, just ask themselves.
[b]No Pollie has to deal with 9.5% Super Guarantee & Stupid ever changing rules [/b][b][/b] – As they have their own you butte Lifetime Defined Benefit Super Scheme so they don’t even have to understand the rules for the rest of the country, they just make the rules as complicated as possible and change them as often as possible.
[b]No Pollie has to deal with a completely unworkable Code of Ethics [/b][b][/b] – most Pollies don’t have any Ethics so of course they dont have to follow an Ethical code – that has been completely rushed, that sits far and away above corporations law in its reach and is completely useless in the real world.
Re pollies super scheme, The defined benefit scheme ceased to be available to any polly elected after 2004. That came about because that idiot Latham was goading Howard re the then current scheme generosity. Howard changed the scheme when he had numbers in both houses, and public servants went with it. Both are strictly accumulation
and look at the ethics that Politicians possess.. lies, back stabbing, greed… enough is enough
Sounds like some Advisers should run for Parliament. Imagine the conversations with ASIC you could have….
Someone from AFCA recently made a public statement saying they would be assessing complaints received after 1 Jan 2020 from the perspective of compliance with the FASEA Code.
So although the Code is still extremely ambiguous, and there is no official enforcement agency, AFCA is using its govt bestowed power to enforce the Code according to its own interpretation. And let’s not forget that one of the fake “consumer representatives” who has a clear ideological agenda to eradicate financial advisers was on the FASEA Board and is now at AFCA.