FASEA’s comments came in response to questions on notice from Liberal senator Slade Brockman, who blasted Standard 3 of the code for amounting to “a complete ban on all conflicts of interest”.
“Will FASEA seek to amend Standard 3 before you cease operations?” Senator Brockman asked.
While the standards authority took issue with Senator Brockman’s interpretation of Standard 3, it said that “FASEA has plans to consult on Standard 3 of the code this year”.
“[FASEA] will continue to work on enhancing and refining it before operations cease,” the body said.
FASEA referred to 37 submissions it had received around its latest code of ethics guidance, many of which had pointed to the urgent need to refine the wording of Standard 3.
“Standard 3 received particular comment with a broad range of suggestions made including [to] retain the standard as is, incorporate the wording and intent from the draft guide into the standard to give it legal application, incorporate a reasonable person and materiality test into the standard, revert to the original wording of the standard re inappropriate advantage, [or] change the standard to provide for a disclose and manage approach,” FASEA said.
Commenting on the news, AFA acting chief executive Phil Anderson said the association was pleased FASEA was showing a commitment to being willing to consult and take action to fix Standard 3.
“We’ve been outspoken over a long time about Standard 3 not being practical,” Mr Anderson said.
“In this document [FASEA] have referred to feedback they’ve got on how to fix it and they’ve talked about being willing to refine it.”
Mr Anderson said the AFA’s preferred option was to revert to the original wording of the draft standard, which referred to inappropriate advantage rather than all conflicts of interest.
“That way there’s a measure there that it’s got to be inappropriate, it’s not just any benefit that may result from a conflict of interest,” he said.
“That’s one of the options, and I’m sure that through the consultation process we can work through what the best options are.”
Funny how the big licensees who are owned by the big product issuers arent seen to be conflicted. Mmm
“There are some ideas so absurd that only an intellectual could believe them” – Orwell on FASEA standard 3
Thanks for the lecture. I am an independent financial planner. This is real impact of the FASEA Code of Ethics:
1. Longer audits – in my case, they have gone from 3 hours a couple of years ago to a full week now plus another week of follow up with more red-tape to satisfy my compliance masters (this is a privately owned dealer group mind you and I am not exaggerating one bit!),
2. SOA’s are even longer
3. There is more red-tape for new clients
4. There is more red-tape for existing clients
5. Licensee fees are going up, PI is going up and client fees are going up
6. Small value clients are being offloaded
7. Small value prospective clients are being turned away
8. Advisers are walking away from their careers in droves
For balance I should include the benefits of the FASEA code
1. Ummm?
2. …..still thinking….
3. ……having trouble here
4. Oh that’s right, the universities who are flogging courses to us, which are linked to the FASEA board members
5. …..ok I’m a bit stumped again……
6. ……still struggling…..
7. Of course, class action lawyers. Yep they will delight in this when they have a good look at the code, and then bankrupt the lot of us.
8. Oh yes, how could I forget – Product providers, the majority of whom see independent financial planners as competitors and who will fill the void with fake, conflicted advice which is really designed to flog product. Yep they are the big beneficiaries. Hang on, wasn’t FASEA supposed to get rid of conflicted advice?
Great job FASEA. Give yourselves a pat on the back. Good luck tidying up your CV before the end of the year and good riddance.
The AFA have to at least do nothing for the Jeny they receive from members. The standard doesn’t need to be changed just adhered to it’s simple. But yes let’s be misguided by a body who has not had the advisers better interest at hand when LIFO and FASEA were First introduced… “outspoken” why? Just to be seen to be to doing “something. Stand up where it’s needed and place your now misguided assistance to wheee it’s actually needed
If FASEA is the true way to professionalising a specialisation/occupation, shouldn’t similar be applied to all occupations/”professions”? Why hasn’t the playing field been levelled and our Doctors, Accountants, Lawyers, Engineers, POLITICIANS, etc required to complete monthly CPD, prove BID, provide 70 page SoAs for every recommendation they make, provide FDSes and Opt-Ins to every client within 60 days, remove any perceived conflict of interest, have to go back to university to complete additional studies, etc….and have the ability to be thrown out of the industry if they slip up on anything?
Suggest you check your facts – such professions already have a code of conduct, associated training/hrs and disclosure etc – why any of those professionals would complete any of the disclosures/obligations applicable to the advice industry is absurd. Instead you make a great case for precisely why the industry needs to level up and aspire to become a ‘profession’. Dealing with people’s wealth and financial well-being is an extraordinary responsibility so basic tenets of conduct and professionalism are required.
If a Doctor who performs surgery that could kill someone can manage to summarise what they did and how it helps the patient in less than 3 pages, why the hell are we giving them 70 page SOAs?
I’ve got no issue with ongoing training, requiring a degree, or accurate disclosure of fees but I’d like my clients to READ the document I provide and understand it thoroughly which is not possible with 70 pages.
Seriously, it is not that hard:
You will not breach Standard 3 by
1. being a duly remunerated employee of an entity that lawfully provides retail financial advice, provided that the provision of that advice are in the best interests of your client
2. receiving a share of profit from an enterprise that lawfully provides retail financial advice as long as you act in the best interest of the client
3. sharing in the profits generated by the provision of ancillary products and services to clients providing that:
• the ancillary products and services are merely incidental and the recommendations are in the best interests of your client
You will breach standard 3 where
1. the dominant purpose of providing advice to clients is to derive profits from selling those clients ancillary products or services from which you personally benefit.
2. if a disinterested person, in possession of all the facts, might reasonably conclude that the form of variable income (e.g. brokerage fees, asset based fees or commissions) could induce an adviser to act in a manner inconsistent with the best interests of the client or the other provisions of the Code.
3. you provide financial advice to invest in a retail product or service from which you benefit and where a reasonable assessment of the circumstances of the client would conclude that the best course of action would be that there should be no change to the client’s circumstances or plan.
This Standard does not say you can’t charge clients to help them. I imagine the only ones this would be unworkable for would be those working for AFSLs that have inherent conflicts of interest…..and yes, this includes Industry funds as much as it does the IOOFs and AMP and Dixons of this world.
You are quoting from one of the many versions of FASEA’s guidance. Not from the legislated Standards.
FASEA’s guidance is just one interpretation of the Standards. It is non binding. It changes frequently. It was issued by an incompetent, conflicted organisation which has finally been recognised as such by the government, and is being terminated. FASEA’s guidance is worthless.
The only thing that counts is the interpretation of the Standards by whatever agency uses them for enforcement purposes. At the moment Standard 3 says all conflicts must be avoided. All forms of remuneration, including fee for service, are conflicted. In the hands of a discriminatory and unfair regulator Standard 3 could therefore be used to persecute any adviser. Unfortunately there are far too many self righteous ideologues in our regulators who have a penchant for indiscriminate adviser persecution. The Standard itself must be amended to reflect its intent.
Rubbish comments Glenfield / FARSEA / ASIC.
Please tell us one other profession or occupation or job requires such a code as strict as standard 3 – that all conflicts must be avoided ?
There isn’t one is there.
Because it’s fantasy land bureaucratic / academic BS and not applicable to the real world.
FARSEA & ASIC proved how Unethical they are in these standards by their paid for comment meddling and manipulation.
If it is not that hard, why are they going to change the Standard ?
Adviser who have problems with Standard 3 are usually brainwashed and working for some product owned licensee or a licensee with links to a product. They tend to either just sell products or use Advice to get more clients into the product. Go back to your discounted licensee fees, your discounted admin fees, your discounted education course and please fail your FASEA exam. I can only hope. Best industry obligations were introduced in 2009 and yet 2013 it was a new concept. Yet still today Advisers have problems with this concept. On your way out take your DFP 1-8 and your BMW and 4000 clients with you, your $8,000 Advice fee, your subsidized education and your discounted product owned licensee with you. If you got a problem with what I said I suggest you start studying annually for your FASEA exam.
you sound bitter, I don’t meet any of the criteria you outlined but I have an issue with Standard 3 as it is ambiguous, open to interpretation and confusing. Not with the principle
Thanks for the laugh. The advisers who have problems with Standard 3, are advisers who have read the thing. My GP, pharmacist, accountant and lawyer would all fail the FASEA Code if it was applied to them. PS. I don’t drive a BMW nor have any links to a product provider owned licensee. However you got one thing right – my fees are fast approaching $8,000 thanks to the ever increasing red-tape and BS from FASEA, ASIC and this insipid Coalition Government.
I also think you sound very bitter but thanks for the comment. Made my day – the pain you must have.
So ASIC paid highly conflicted academics and choice to push for the absurd Standard 3.
No conflicts there hey buddy.
Then FARSEA changed the draft standard 3 to match what ASIC paid for comments said.
And FARSEA then released the BS Standard 3 version completely different to the draft without allowing proper consultation of the change, that was completely against their guidelines to consult.
Yep no conflicts or problems there again hey.
Seriously, FARSEA fail everyone of their on Standards and Values. Corrupt, inept and FARSEAcal the whole approach.
Come on, be real, it is a Mercedes thanks. Oh, and everything else you wrote is wrong too.
The code of ethics was developed by academics who had a big conflict of interest as they sold education to advisers. The code of ethics was also written in a climate that asked for advisers to be punished and humiliated and was therefore quite unsuited.
FASEA is nothing like the above today. They may actually do a good job, hopefully making it impossible for product providers to have a commercial salesforce of qualified advisers because that is the root of all the problems.
You are confusing issues. The conflict of interest from course providers has most impact on the education standards. These standards determine not only the minimum education level required, but also the previous education that is deemed to be worthless and therefore must be repeated, and the ongoing education required for CPD forever into the future.
The conflicted course providers have scammed it so they profit in 3 different ways, and will continue to do so long after FASEA is wound up. If it wasn’t so dishonest and unethical, one might say it was brilliant. Hopefully a future corruption inquiry will hold them to account.
Read the words. They have ‘plans to consult’. We all saw how the consultations went in the past. They were a sham. Anyone who thinks it will be different this time around is kidding themselves.
While I congratulate Senator Brockman for asking a hard question (first time in ages), the fact remain the Ministers (& their advisers) in this Federal LNP Govt are inept.
Bizarre that planners have a problem with avoiding a conflict of interest. Hopefully the exam will cull a few more of these advisers. Pitty you can’t make a living providing advice you have to clip the ticket somehow, get a slice of the platform fee, negotiate a cut whilst locking your cients into Hub24, or whatever white label product your licensee has negotiated, or expect a payment for that referral. Lot’s of industries have conflicts but they are allowed to persist. The FPA once said planners were uneducated and needed higher standards and it wasn’t the CBA fault, it was individual planners…Perhaps there is some truth to that.
It doesn’t work like that anymore dude. Get with the times
The truth Modern Adviser (should be brainwashed adviser) is hard to take. Pretty sure if I looked up your name it would say licensed by IOOF holdings…or similar.
Lets say someone is Licensed with Australian Super – what product would I sell?
Exactly. But let’s not pretend all the advisers licensed by IOOF, AMP, or any of the mid tier ones that have their own products are any better. The quicker Government separates advice and product the better. Pity they don’t realise how easy it would be to fix the mess they have created.
Hilarious. Never mind that Standard 3 is simply unworkable in its current form. Do please carry on.
[b]All[/b] professionals would have a problem with avoiding [b]all[/b] conflicts of interest, because every form of professional remuneration is conflicted in some way, including fee for service.
Standard 3 mandates that [b]all[/b] conflicts must be [b]avoided[/b]. That is unworkable for financial advice, and would be unworkable for every other profession. Some conflicts can only ever be [b]managed[/b], not avoided. That is why there is such ongoing controversy about Standard 3.
Various commentators, including FASEA, have said Standard 3 doesn’t really mean that [b]all[/b] conflicts must be avoided, even if it does actually say that. Well if that’s the case, change the wording to reflect what it’s supposed to mean.
I agree. The exam should remain. So should higher minimum education standards. If you can’t pass the FASEA exam, you should not be in the industry. It is such a low bar that you would be dangerous to clients who rely on your advice. Let’s not be an industry that accepts the lowest common denominator.
Only one word for this fiasco….FARCEA
Then again, there’s appropriate (ie what the majority of advisers ensure their advice is) and “appropriate” (ie what the likes of ASIC and their undereducated and inexperienced people demand…which is often ridiculous but still
FASEA was so bloody-minded and stubborn they continued to defend their sham Code of Ethics until the minister eventually became so exasperated she had to scrap the whole joint. Now all of a sudden the AFA think FASEA are going to turn around at the last minute and revert to the original wording for Standard 3? Remembering that ASIC felt so passionately about this, they compromised their integrity by lobbying for the current wording and they even paid cash for a corroborating submission. Pigs will fly before FASEA fix the code. Their comments are nothing more than weasel words, designed to deflect criticism and kick the can down the road until they are wound up in 212 days.
The FASEA Financial Planners and Advisers Code of Ethics are very similar to that of the accounting profession.
The APES 110 Code of Ethics for professional ethics (including independence standards) could of been adopted many years ago by the FPA and AFA, (and government) and could of become part of APES if they wanted to, however as early FSR 2002-2003 the FPA sought a war with accountants and the accounting bodies instead of working together, which in hindsight could of been a better outcome perhaps. Getting FP and advisers to sit this exam was just not a workable thing, as I cannot see how that was advantageous to the consumer. :D8):0
Good point but that would require planners to be individually licensed. Clearly some vested interests, including the FPA have blocked it for years until their recent change of heart ie wallet.
Unfortunately the sale of product and financial advice is so heavily intertwined that if you cut one off the other would die. Planners fall into three camps. 1) They sell a product, 2) they use advice to sell products and 3) finally they sell advice but use products. (most of the third are broke and quite rare). Consequently there will always be a conflict and advisers will never be professionals or treated to the regulatory exemptions professionals receive.
[i]3) finally they sell advice but use products. (most of the third are broke and quite rare). [/i]
That’s nonsense. I run a self-licenced firm which specialises in providing investment advice regarding portfolios we manage (off platform). Our firm structure is not rare and we are perfectly profitable. The issue, of course, that it is a lot harder and more work than simply dumping a client’s money into 5 managed funds and leaving it at that.
There are quite a few advisers in group 3 who do very well. Good comment otherwise.
IMO, while this is definitely a step in the right direction, I think the whole damn code is a disaster that was designed to deliberately hit advisers anyway possible. I’m not saying remove the theory behind it so advisers can go out ripping clients off either; that’s far from my intention but the way we’re hit from every angle, and are expected to work for nothing now is just wrong, wrong, wrong.
Not one other industry has been hit like this – nor by people who are more conflicted in their actions!
The fact this is being amended should also, in my opinion, mean all remaining FASEA Exams this year are postponed and pushed back.
Again, this seems like good news.
But given their track record, I’d say it’s even odds it comes back even worse than it is now.
I mean, only a true bureaucrat could see this as a positive step: “…incorporate the wording and intent from the draft guide into the standard to give it legal application…”
Sure, let’s make the bloody thing even longer.
Is ‘consult this year’ really code for ask everyone but only listen to those that are conflicted and want to see the end of the ‘independently owned’ financial advice industry?
That’s what I thought – had to get these people from FASEA to use clear language.
Phil Anderson for PM
The most unethical exam, I’ve sat, passed and still have no idea what they really want. Just ask every compliance manager, every licencee, every politician, every lawyer they all have different interpretations. ATO has tax rulings why can’t ASIC have ASIC rulings where we can put situations forward and they give the tick of approval. The FPA CFP’s program, I think is unethical and conflicted. You study and pass yet when you don’t pay your membership fee they remove your qualification.
because it’s too easy for them – the harder the better – keeps them employed. …
That’s because as a CFP your also bound by the FPA code of professional conduct and code of ethics. You can’t be bound by them if your not a member. It goes hand in hand. You keep a Uni degree designation but are not bound to them in the same way. Every association is the same.
Its a designation, not a qualification, they own it, that’s why they can remove it. Agree re everything else though, I sat and passed the exam and couldn’t tell you what the 12 standards are now a year later. Who cares, I just keep doing what I do, I do it well, and I do it with the client at the front of mind every step of the way.
Good point on the FPA, and that’s exactly why that ‘qualification’ is not taken seriously in the education standards. Its not a qualification/masters equivalent if you lose it as soon as you stop paying your fees. The day the FPA changes that (so never) will be the day it gets officially recognised, as well as differentiating between those who actually studied for it, and those who were gifted it for ‘experience’.
The FPA is nothing more than another conflicted, commercial business.
Four words for FPA…..Fee for no service
Having studied the whole stupid thing— it has ruined lives destroyed businesses and many years of experienced advisers lives down the drain!
but it saved the Careers of a few CEO’s.. I’d like to see you live off less than $1.5 million..it stopped a few redundancies at Universities…Great win for Griffith Uni and was even almost a win for the FPA until Sam H and the Royal commission came along……Stop being so selfish. Geeez…..You planners are really uneducated rogues….oh wait that’s the CBA and FPA press release from 2017.
The whole FASEA situation is a misunderstanding of the industry. The stockbroking industry is about to be destroyed after 200 years of operation. Clients will end up paying a lot more for less and the risks will be the same.
Stockbrokers are one of the most self centred conflicted business models in the world, needs to change!
This should never have happened in the first place. Get on with fixing the wording of Standard 3 so the “intent” is captured by the legislative part.
get on looking after your AFSL Rob.
Thanks for the heads up anonymous