FASEA’s standard three in its Code of Ethics states that advisers “must not advise, refer or act in any other manner where they have a conflict of interest or duty”.
However, the previous draft Standard Three stated that advisers “must not advise, refer or act in any other manner if it would deprive an appropriate personal reason for doing so”.
FASEA’s Code of Ethics comes into effect on 1 January 2020.
According to managing director of the Investment Collective, David French, FASEA’s current standard three is an example of gross regulatory overreach.
“FASEA and industry had agreed on an earlier version of standard three, but with just over a month to implementation, FASEA inserted the current wording. It is reckless, ill-considered and simply not acceptable,” Mr French said.
“While at first glance the proposed standard might seem reasonable, FASEA provides no guidance as to what comprises a conflict of interest. Such matters can be seen as circumstances where the interests of an adviser might influence advice given to a client, but as a matter of fact, who judges that?”
Mr French’s comments days after the AFA called on the government to delay the implementation of FASEA’s code of ethics, saying it was “unworkable in its current form”.
For example, Mr French noted that some commentators would suggest that asset-based fees are a likely conflict.
“But how can that be when asset-based fees rise and fall with the value of the assets, completely aligning the interest of the adviser and the client? A conflict could arise where assets were financed by debt, but advisers already cannot charge fees on that portion of assets, so that’s been dealt with,” he said.
“Do we have to have a definitive list of conflicts? A recent court case suggested that the only conflicts that matter are real ones that can be demonstrated to have been detrimental to clients. Where does common sense come into it?”
Mr French believed that combined with a lack of accountability, the broad-brush nature of standard three makes it unworkable.
“It suggests a push toward hourly or flat fees, but these are inherently conflicted. The incentive is not to become more efficient but to bill more hours, and to pass work onto juniors while continuing to change higher rates,” Mr French said.
“In the legal and accounting industries such conflicts are at the heart of many complaints, resulting in significant efforts to address it. Likewise, flat fees do not alter with results, so there is no direct alignment with client outcomes.”
Finally, Mr French also questioned how standard three would meld with existing legislation, which says that conflicts have to be identified and managed, or ASIC’s RG246, which, while virtually unreadable, provides many examples of conflicted and non-conflicted remuneration.
“Is FASEA relying on the law, or on ASIC’s Regulatory Guide, or on some internally generated view of what comprises a conflict of interest? FASEA has already had two directors step down due to conflicts of their own,” he said.
“They are really coming from behind in terms of garnering respect from those they are charged with regulating. Perhaps it’s time to have the matter decided by the courts.”
[quote=Anonymous]Folks, it’s as clear as the nose on your face. FASEA has be stopped and cannot be allowed to continue. I’ve just read an email I received yesterday from the UFAA who’ve done an enormous amount of investigative work into FASEA and its reads:
“FASEA is gifted $3.9million a year, but this is not from the Government; If you didn’t already know, FASEA is funded by the following BANKS and INSTITUTIONS:
“FASEA receives funding from eight contributors under a Funding Agreement which binds the following parties:
1. Australia and New Zealand Banking Group Limited ABN 11 005 357 522
2. Bendigo Financial Planning Limited ABN 81 087 585 073
3. Commonwealth Bank of Australia ABN 48 123 123 124
4. Macquarie Equities Limited ABN 41 002 574 923
5. National Australia Bank Limited ABN 12 004 044 937
6. Suncorp-Metway Ltd ABN 66 010 831 722
7. Westpac Banking Corporation ABN 33 007 457 141
8. AMP Limited ABN 49 079 354 519”
FASEA has the absolute hide and cheek to point its hypocritical finger of conflicted remuneration at advisers yet…
“there are potential conflicts with members of the FASEA Board, who may have links with institutions or education providers. Providers that could reap significant financial benefits from selling expensive FASEA-approved degree courses to thousands of advisers that FASEA has determined need these qualifications. Of course, FASEA is not recognising any of your existing experience!
If I wasn’t convinced that FASEA had been put together by the banks (and supported by the government who receive billions of dollars in taxes from the banks), I am now. This is the most cunning, underhanded, corrupt abuse of power I’ve ever seen and I’m ashamed to admit it, but I never thought I would see such disgraceful behaviour here in Australia. Every single FASEA board member appears to have sold their financial services sole to the almighty dollar and we have to do something to stop this. If it wasn’t clear what FASEA is all about before, it absolutely should be now.
I’m staggered. Am I still living in Australia? How can this be allowed?[/quote]
It’s been allowed by the industry. You have had the ones that saw the writing on the walls and have been screaming about all this from the start. Then you had the oh I am qualified so it doesn’t matter and you are all whining because you are lazy or rip clients off etc etc. Or the advisers who can get away with charging huge amounts for advice rubbing their hands together while the smaller advisers and country or remote advisers are watching their entire world crumble.
Fact is apart from the obvious advisers themselves have to look in the mirror and ask themselves if they did all they could before shit hit the fan.
It’s because those making the rules have no knowledge or experience in the industry that is Financial Advisory. It’s the same as having a lawyer head up the RC; or Educational institutions having a seat on the committees that determine educational requirements – when they teach nothing of real value.
Hello… hello…. Deborah Kent ….where are you ?????
Remember the thousands of advisers whom you use to represent their best interests at the AFA ??
Hello Deborah……..beep beep beep beep.
We are under attack!! Stop putting your heads in the sand and FIGHT BACK!! Call the AFA, FPA, your local federal pollie.
Support the High Court challenge to protect our GF property rights!! go here- https://arcfund.com.au/
Support the UFAA lobby effort!! go here- https://ufaa.asn.au/
FASEA are a joke, they are a mix-matched bunch of idiots.
I think the correct spelling for what you have as “FARSEA” should be FARCEA, showing in the word the true ‘FARCE’ of the organization. Fully agree with you in spirit!
.
Just for giggles, here’s the [b]Oxford dictionary definition[/b][b][/b] of FARCE (read FARCEA if you like!): [i]”a comic dramatic work using buffoonery and horseplay and typically including crude characterization and ludicrously improbable situations”[/i][i][/i][b][/b][b][/b]. Seems like they at least got the name close to reality from the beginning! 🙂 Hard as it is, keep the faith fellow advisers!
What ever spelling you like buddy but the FARCE of FARSEA continues.
Just remember their initial stance on past education that any degree or education older than 10 years was worthless. WTF are these morons thinking.
Imagine telling every educated person in the country that they have to go back to Uni to start again every 10 years. ForF##kSake what an absolute joke these bureaucrats are.
Ya gotta love ivory tower academics !!
This industry it s being strangled to death
No Sh*t Eisenstein. Those who buried their heads in the sand are now waking up to the cold hard facts that the whole FASEA, Royal commission is a total farce. However has the potential to ruin our lives. The regulators/legislators need to take a long hard look and see what they have done to an industry and more so the people in it. It should be taken to Human rights commission for harassment, bullying and intimidation.
[quote=Anonymous]Finally a “glass half full” person. About time.
Sure there is massive change going on but you can either spend your time grizzling in the hope that you will be allowed to bumble along in an inefficient industry with too many old practices, secrets and protections or get on the path to positive change.
Grandfathered commissions and “secret adviser business” needed to be retired so that the industry can grow and more people will want to engage with advisers because they will see its transparency and professionalism.
And while we focus on the changes advisers have to make the changes that licensees need to make are arguably bigger. Almost all licensees are inefficient, stacked with too many overpaid back office boffins and little transparency around their finances, fee modelling, remunerations etc etc. Again, most of them are bundling up questionable “included services and support” that in practice don’t add a lot of value. Essentially their fees could come down and their efficiencies and real value must go up.
My view is that the better practices, the bigger practices who realign to the positive future will be looking for substantially reduced fees because they will require very little from their licensee above a commission system and an AFSL to hang under. And that’s for those who decide the pain of getting their own AFSL is a burden they don’t want.[/quote][quote=Anonymous]Finally a “glass half full” person. About time.
Sure there is massive change going on but you can either spend your time grizzling in the hope that you will be allowed to bumble along in an inefficient industry with too many old practices, secrets and protections or get on the path to positive change.
Grandfathered commissions and “secret adviser business” needed to be retired so that the industry can grow and more people will want to engage with advisers because they will see its transparency and professionalism.
And while we focus on the changes advisers have to make the changes that licensees need to make are arguably bigger. Almost all licensees are inefficient, stacked with too many overpaid back office boffins and little transparency around their finances, fee modelling, remunerations etc etc. Again, most of them are bundling up questionable “included services and support” that in practice don’t add a lot of value. Essentially their fees could come down and their efficiencies and real value must go up.
My view is that the better practices, the bigger practices who realign to the positive future will be looking for substantially reduced fees because they will require very little from their licensee above a commission system and an AFSL to hang under. And that’s for those who decide the pain of getting their own AFSL is a burden they don’t want.[/quote]
FASEA Standard 3 is unworkable in its current form. What’s not to get ??
This is a SOEFU….Self Organised Educational / Ethical F…. up!
F inancial
A dvisers
S ay
E nd this
A bomination
It is important that we also realise that the fees are not the only ‘conflict’. What about if we hold an investment that we recommend a client buy? That is a conflict – hence not allowed. I however like to think of it as an ‘alignment of interests’
[b]“must not advise, refer or act in any other manner where they have a conflict of interest or duty”[/b][b][/b]
Does the FARSEA Board adhere to this standard ? I think not.
FARSEA Board need to fully disclose and cease to act regarding ALL conflicts of Interest.
If you manage to shoot this messenger (FASEA), will that change the message or will the message intensify?
It’s not about shooting the messenger FARSEA, it’s about trying to get some bloody common sense out of these BUREAUCRATIC BUFFOONS who would not understand the real world if it slapped them in the face.
Finally a “glass half full” person. About time.
Sure there is massive change going on but you can either spend your time grizzling in the hope that you will be allowed to bumble along in an inefficient industry with too many old practices, secrets and protections or get on the path to positive change.
Grandfathered commissions and “secret adviser business” needed to be retired so that the industry can grow and more people will want to engage with advisers because they will see its transparency and professionalism.
And while we focus on the changes advisers have to make the changes that licensees need to make are arguably bigger. Almost all licensees are inefficient, stacked with too many overpaid back office boffins and little transparency around their finances, fee modelling, remunerations etc etc. Again, most of them are bundling up questionable “included services and support” that in practice don’t add a lot of value. Essentially their fees could come down and their efficiencies and real value must go up.
My view is that the better practices, the bigger practices who realign to the positive future will be looking for substantially reduced fees because they will require very little from their licensee above a commission system and an AFSL to hang under. And that’s for those who decide the pain of getting their own AFSL is a burden they don’t want.
“must not advise, refer or act in any other manner where they have a conflict of interest or duty”
This is very simple and very clear. It is just impossible to do if you are working for or allied with a product provider.
Community expectations have shifted – in the Royal Commission community expectations were front and centre.
“This is very simple and very clear”
Not really. Any fee charged could be considered to be a conflict of interest.
At the worst interpretation of Standard 3, any adviser is conflicted just by charging a client whether it be a flat fee or hourly rate.
All advice is conflicted if there is an element of remuneration. That includes fee for service advice. Are you saying it’s simple and clear that the only financial advice that should exist is that which is provided for free?
It is impossible to remove conflicts from a commercial advice service. Conflicts can only ever be managed. The community expectation coming out of the Royal Commission is that conflicts are managed in the best interests of the client. The community expectation was never that some payment methods and business structures which provide benefits to consumers would be taken away from them.
It is also impossible if you charge asset based fees, hourly fees or flat fees. Put simply, if you provide advice for a fee there is a conflict. The issue is not pretending it doesn’t exist but being transparent about it and managing it.
[quote=Gex X Planner ]It is now or never that the industry unites against this MADNESS. FASEA is either incompetent or majorly conflicted themselves trying to take down the IFA model. The latest email from the UFAA is absolutely mindblowing, showing how conflicted FASEA is and should be top story on every industry site at the moment. Advisers, wake up, don’t fall for this “professionalism” spiel, it is designed to take you down!!! [/quote][quote=Gex X Planner ]It is now or never that the industry unites against this MADNESS. FASEA is either incompetent or majorly conflicted themselves trying to take down the IFA model. The latest email from the UFAA is absolutely mindblowing, showing how conflicted FASEA is and should be top story on every industry site at the moment. Advisers, wake up, don’t fall for this “professionalism” spiel, it is designed to take you down!!! [/quote]
I also like this part of the email from UFAA
But it gets worse. FASEA’s Code of Conduct, or we should say the Bank-sponsored code of conduct for Advisers, does not appear to apply to Licensees; so Licensees with salaried advisers, like the BANKS and INSTITUIONS won’t be affected by the ban on commission income. This is anticompetitive and a disgrace!
It’s a conflict of interest to be a member of the FPA and or the AFA given the payments they get from product providers. You can’t get some level of support from these bodies (say a webinar on FASEA) that’s been partly funded from a product manufacturer, and then use financial product from those companies, and also be a member of these bodies. You’ve got an interest in the FPA existing due to PI requirements or TPB obligations ( the FPA is financially dependant on getting that money from a product provider), you’ve got an interest with the client who will use that product, you’ve got an interest when recommending the product, that’s multiple interests and they’re conflicting. Looking forward to reporting these members to the code monitoring body as a test case. Just why does the AMA or CPA Australia only accept payments from members and decline payments from say Zero…because they say it’s a conflict. You’ll need to resign come 1 January 2020.
Folks, it’s as clear as the nose on your face. FASEA has be stopped and cannot be allowed to continue. I’ve just read an email I received yesterday from the UFAA who’ve done an enormous amount of investigative work into FASEA and its reads:
“FASEA is gifted $3.9million a year, but this is not from the Government; If you didn’t already know, FASEA is funded by the following BANKS and INSTITUTIONS:
“FASEA receives funding from eight contributors under a Funding Agreement which binds the following parties:
1. Australia and New Zealand Banking Group Limited ABN 11 005 357 522
2. Bendigo Financial Planning Limited ABN 81 087 585 073
3. Commonwealth Bank of Australia ABN 48 123 123 124
4. Macquarie Equities Limited ABN 41 002 574 923
5. National Australia Bank Limited ABN 12 004 044 937
6. Suncorp-Metway Ltd ABN 66 010 831 722
7. Westpac Banking Corporation ABN 33 007 457 141
8. AMP Limited ABN 49 079 354 519”
FASEA has the absolute hide and cheek to point its hypocritical finger of conflicted remuneration at advisers yet…
“there are potential conflicts with members of the FASEA Board, who may have links with institutions or education providers. Providers that could reap significant financial benefits from selling expensive FASEA-approved degree courses to thousands of advisers that FASEA has determined need these qualifications. Of course, FASEA is not recognising any of your existing experience!
If I wasn’t convinced that FASEA had been put together by the banks (and supported by the government who receive billions of dollars in taxes from the banks), I am now. This is the most cunning, underhanded, corrupt abuse of power I’ve ever seen and I’m ashamed to admit it, but I never thought I would see such disgraceful behaviour here in Australia. Every single FASEA board member appears to have sold their financial services sole to the almighty dollar and we have to do something to stop this. If it wasn’t clear what FASEA is all about before, it absolutely should be now.
I’m staggered. Am I still living in Australia? How can this be allowed?
FASEA standard 3 has now created an environment where professionals will be handing each other ENVELOPES OF CASH. Well done FASEA give yourselves a clap!!!
Professionals handing each other envelopes of cash. Professionals?
Here Here. A succinct and totally logical view. Something FASEA and others seem completely unwilling to recognise which further diminishes their standing.
UFAA was on the money in there last email update we are still being screwed by the fsc and the banks who fund guess WHO yep that’s right FASEA funded by fsc and the banks we are all in interesting times
The circus moves on
While the big players continue to pillage with impunity the smaller IFA players are under continued attack. All the while our representative bodies continue to fail us.
Indeed
It is now or never that the industry unites against this MADNESS. FASEA is either incompetent or majorly conflicted themselves trying to take down the IFA model. The latest email from the UFAA is absolutely mindblowing, showing how conflicted FASEA is and should be top story on every industry site at the moment. Advisers, wake up, don’t fall for this “professionalism” spiel, it is designed to take you down!!!
ntellectual Yet Idiot (IYI) is a term coined by Nassim Nicholas Taleb in his essay by the same name that refers to the semi-intelligent well-pedigreed “who are telling us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for”. They represent a very small minority of people but have an overwhelming impact on the vast majority because they affect government policy. IYI are often policy makers, academics, journalists, and media pundits.
The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “red necks” or English non-crisp-vowel class who voted for Brexit. When plebeians do something that makes sense to them, but not to him, the IYI uses the term “uneducated”. What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when the plebeians dare voting in a way that contradicts his preferences.[10]
Taleb points out that being educated and “intellectual” does not always mean that someone isn’t an idiot for most purposes. “You can be an intellectual yet still be an idiot. ‘Educated philistines’ have been wrong on everything from Stalinism to Iraq to low-carb diets.”
Taleb dedicates a chapter to IYIs in his book Skin in the Game.