Currently, all advisers will be required to comply with the FASEA code of ethics from 1 January 2020.
But in a policy document to members, AFA general manager for policy and professionalism Phil Anderson said the code of ethics guidance has provided little insight into the requirements of the code of ethics or direction for financial advisers.
Further, he said the guidance document provided has instead opened up additional areas of confusion, with many of the examples being of either limited benefit, as they are obviously non-compliant, or they fail to address the core issues where guidance is required.
In particular, Mr Anderson called standard three on conflicts of interests inconsistent with the long-established requirements to manage and disclose conflicts of interest.
“Conflicts are very common in financial services and exist in ways that do not disadvantage clients. They cannot be completely eradicated, and an outright ban would be entirely impractical,” he said.
As a result, Mr Anderson said the AFA has been left with no choice other than to oppose the code of ethics in its current form, and called on the government to delay the commencement of the FASEA code until it can be re-worked and advisers can sensibly prepare for implementation.
“We were seeking much greater certainty through the guidance. We wanted to see a clear explanation of the situations where financial advice would be compliant. We wanted certainty that commissions on life insurance advice would be permitted,” explained Mr Anderson.
“What the guidance provides is no certainty, in that it lacks any explanation of where financial advice will be compliant, but rather identifies cases where potentially it might not be compliant. This has meant that we now have important additional areas of uncertainty with respect to brokerage, asset-based fees and commissions.
“It is unfortunate that the FASEA board have sought to use this as an opportunity to re-write the law that applies to financial advice, rather than use this as an opportunity to provide sensible guidance to the financial advice community with the development of a code that is both practical and consistent with the best interests of clients.”
I attended a webinar today featuring an academic from the Ethics Centre talking about the FASEA Code. He gave some great theoretical background and broader context for the various values and standards in the Code. He also demonstrated familiarity with the various case studies and examples in FASEA’s guidance documents.
However when he tried to answer some specific questions from the audience on practical implementation issues, it became clear he really doesn’t understand the financial advice industry well at all. His knowledge of it seems to be based on an unrepresentative collection of case studies. Like many academics, lobbyists, and journalists he was focused on the small minority of cases when things go wrong, while ignoring the vast majority of everyday cases when things go right.
I suspect whoever developed the FASEA Code took a similar approach. (Perhaps he was actually the guy? He’s employed by a FASEA Board Member). This is why we have ended up with something that is impractical to implement, and will do the majority of consumers more harm than good. There’s some great underlying concepts in the FASEA Code and most of it is a step in the right direction. But it is simply unworkable in its current form. They need to start listening to people who actually understand the industry as a whole.
Is this the guy who put his own book on the reading list for the FASEA exam? Should have asked him to explain why that isn’t a conflict of interest.
No, the own book guy is Simon Longstaff, who is a FASEA Board member. I think the webinar presenter was Matthew Beard? He’s holding another webinar soon where advisers can submit real life ethical questions.
Perhaps you should submit your question about a FASEA Board member putting their own book on the reading list? Or perhaps the broader question of “Is it a conflict of interest for someone who makes money from ethics education, to use government bestowed power to force all advisers to undertake lots of extra ethics education?”
[quote=Anonymous]What joke this all is. Not FASEA but the individuals, organisations and businesses that keep bleating about the changes rather than getting on with increasing the professionalism of the industry that calls itself financial planning ( or some other such terms ). The truth is it has never been able to self regulate and has been full of issues. It has been exposed and as such only an external party can be relied on to improve it. And having people of boards who haven’t been part of the sordid history is a very good thing – they have no bodies to keep buried!
I would hazard a guess that the smart professional businesses that have seen the changes of a way to future proof their models don’t bother to comment to any of these stories – they just got on with it.
Another article today talks about how few retirees use an adviser. Doesn’t that tell you how much the industry needs to improve itself? Don’t use “ignorance” of retirees for not using an adviser because many many retirees ( amongst others ) who have used advisers historically have not seen any benefit from the “significant value” an adviser can ( or should that be SHOULD ) add – certainly for the fees they are being charged.
If FASEA causes a flush out of the industry then that will be for the great benefit of those who have accepted the changes and seen the benefits of it.[/quote][quote=Anonymous]What joke this all is. Not FASEA but the individuals, organisations and businesses that keep bleating about the changes rather than getting on with increasing the professionalism of the industry that calls itself financial planning ( or some other such terms ). The truth is it has never been able to self regulate and has been full of issues. It has been exposed and as such only an external party can be relied on to improve it. And having people of boards who haven’t been part of the sordid history is a very good thing – they have no bodies to keep buried!
I would hazard a guess that the smart professional businesses that have seen the changes of a way to future proof their models don’t bother to comment to any of these stories – they just got on with it.
Another article today talks about how few retirees use an adviser. Doesn’t that tell you how much the industry needs to improve itself? Don’t use “ignorance” of retirees for not using an adviser because many many retirees ( amongst others ) who have used advisers historically have not seen any benefit from the “significant value” an adviser can ( or should that be SHOULD ) add – certainly for the fees they are being charged.
If FASEA causes a flush out of the industry then that will be for the great benefit of those who have accepted the changes and seen the benefits of it.[/quote]
Not sure where to begin with this other than to say no… We all want to see the profession lifted. NO QUESTIONS. The issue is a code of conduct and laws that are ambiguous about how we operate as a business. Nothing to do with the type of financial advice you provide. They are coming in with Draconian laws that tell me how I make a profit in business which is WRONG… The worst part is they’re doing this under codes of conduct that don’t even make sense and we can be permanently banned for mis-interpreting and also have our names PUBLICLY shamed.
Either you are not an adviser and don’t understand this or you’re an adviser who really doesn’t understand what all these changes mean for them personally.
What joke this all is. Not FASEA but the individuals, organisations and businesses that keep bleating about the changes rather than getting on with increasing the professionalism of the industry that calls itself financial planning ( or some other such terms ). The truth is it has never been able to self regulate and has been full of issues. It has been exposed and as such only an external party can be relied on to improve it. And having people of boards who haven’t been part of the sordid history is a very good thing – they have no bodies to keep buried!
I would hazard a guess that the smart professional businesses that have seen the changes of a way to future proof their models don’t bother to comment to any of these stories – they just got on with it.
Another article today talks about how few retirees use an adviser. Doesn’t that tell you how much the industry needs to improve itself? Don’t use “ignorance” of retirees for not using an adviser because many many retirees ( amongst others ) who have used advisers historically have not seen any benefit from the “significant value” an adviser can ( or should that be SHOULD ) add – certainly for the fees they are being charged.
If FASEA causes a flush out of the industry then that will be for the great benefit of those who have accepted the changes and seen the benefits of it.
Pretty sure they dont use them because they run a mile once the professional fee quote is provided to cover the costs and meet the legal requirements. Best solution I can see is that we all become employees of not-for-profit super funds and have our time paid for out of all members fees…what’s in it for the not-for-profit super funds? Minimum Fee For Service advice fees are going to skyrocket and that’s just to break even… heaven forbid we make a profit for the risk we take as self employed advisers. The profitable ones that are getting on with it are culling their clients and focusing on HNW. That will leave a financial advice class system..the not-for-profit product sales adviser for the mums and dads and the self employed independant adviser for the HNW. Insurance specialists…maybe a space in the HNW area but for the mum’s and dad’s…off to your super fund you go. Shine a spotlight on any industry and plaster it all over the media constantly and see how many people stop using those services. Ban employment/authorisation by product providers. That will solve most of the bad conflicted advice. Then cut the red tape and let advisers advise their clients not fill out forms and hours of paperwork to satisfy a utopian dream of perfect conflict free advice all the time every time. I’ve got my house on the line if I lose my licence or am sued for advice that a” disinterested person believes MAY be a conflict” what kind of risk premium should I put on my hourly rate for that?
What do you do for work then? Sounds like you don’t quiet grasp what the CoE is really stating, and how impractical it is. Explain how you would run a FP practice and still adhere to the CoE?
Can somebody please enlighten me , and state where FASEA dictates that you can no longer charge clients based in FUA.
Bottom of page 17, FASEA Code of Ethics Guidance (FG002). Easy to miss, as none of the 32 case studies cover asset-based fees or life insurance commissions. It’s almost like FASEA were hoping no-one would notice and we would all wake up on 1 January to discover our jobs are gone and businesses are bankrupt.
1) in regards to payment of fees, can you get “clear”, free and “prior” consent if the remuneration is variable? 2) Page 17 of FASEA document. [i]You will breach Standard 3 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.[/i][i][/i] That being ask Mum or Dad down the street and say if I charged 1% of funds invested could I be induced to persuade you to invest more, ASIC has been saying yes since 2011.
Or, let’s ask the same question another way ‘do you think it’s ethical or in your best interests for me to charge you the same amount of money out of your portfolio whether it makes you money or not?’
I know my clients like me to be sitting on their side of the table, so to speak, when it comes to investment returns.
It’s easy for advisers to blame ASIC for the current situation, but the real culprit is the collective advice industry. It had years and years to address issues of malfeasance and ripping consumers off and did nothing. It has had almost 12 months to raise and address concerns about FASEA and the code. In fact, it had a great opportunity at the last federal election to influence the outcome but did nothing, unlike the mortgage broking industry that began to mobilise 12 months ago and achieved a great outcome. If the industry is incapable of self-regulation then someone else will do it and that’s exactly what’s happened. Now everyone is bleating that their world is being turned upside down. Too little too late!
The real issue is the media and political spin on things though. Yes there have been issues with the Advice sector and some terrible ones at that. Though we see almost weekly clients who’ve had millions stolen by their Accountants and Lawyers. Not to mention Property “Gurus”. The difference? These sectors are allowed to continue as there seems to be the idea that there are only a few bad eggs amongst them, whereas the majority of Advisers are bad eggs? That’s not right at all. If it’s right for one already over-regulated sector to be even further over-regulated following a Royal Commission (run by someone who had no idea himself about the practicalities of Advice or what clients really want), then it’s time for the other sectors to be regulated in similar ways. A RC into Accounting, Real Estate and the Legal professions followed by overburdening and impractical rules and regulators.
Agree 110% but I’m pretty sure you’d be a member of the FPA and you’re quite happy with their relationship they have with product providers, and how that relationship helps them to “determine the direction of advice in Australia”” and you’re quite happy with the current CEO and you’re quite happy with the fact they’ve got $10 million sitting in cash earning zip and you’ve never sent an email to questioning this. And I’d even go one step further and say you’re probably licensed by someone owned by a product manufacturer. In short you’re like 90% of advisers. All of the above a very easy things within your control.
Well said.
FARSEA board members must all start with full disclosure of ALL their conflicts of interest.
FARSEA and Over Bloody Complicated ODwyer, what a disaster of bureaucratic BS !!!
What a joke.. Get it right, FASEA board
I was originally quite optimistic about FASEA. Unfortunately, Kelly O’Dwyer made a grave mistake by handing over the reins to a board which mostly has no background or experience with the financial advice profession and it appears to have been hijacked by academic nutcases, with no concept of the real world. How can FASEA be allowed to change the law, without conducting any research or testing on the impact of their measures, or properly consultat with practicing advisers? No other profession would tolerate such an insane set of circumstances. If FASEA is allowed to proceed, the impact will be devastating. Banning asset-based fees and life insurance commissions, with only ten weeks warning, is reckless to say the least. But they way they are going about it, using tricky language and failing to include a single case study in the guidance document, is alarming. Most advisers won’t even see it coming. If FASEA is allowed to proceed, watch ASIC bully dealer groups into switching off adviser revenue early next year, sending thousands of advisers bankrupt and destroying jobs. The FASEA board is a monumental failure and they have lost the support of the adviser community. They need to be stood down immediately. The board must be replaced with a majority of experienced, practicing advisers. There is no other way forward.
FASEA have failed in every way any mandate given them. The code as Phil says is unworkable and virtually renders all advisers as non compliant with the code as it stands. The method and content of the exam is no better. I truly feel for Advisers caught up in this horrible mess…can I also add my utter frustration with ANYONE who keeps bleeting about how important all this guff is to protect consumers and restore trust. Trust is not there because ASIC did not do their job properly and have never taken responsibility for this other than to cop a belting at the RC and then come out and smash the hell out of anyone they could get their hands on to compensate. New research is now saying more and more retirees are self advising and avoiding a planner…so well done great result bafoons
I agree that ASIC have had a hand in destroying trust by not doing their job properly. However, the real reason why trust has been destroyed has been because many institutionally aligned advice firms have been charging people for advice they have never received.
Given FASEA’s utter incompetence in the Senate Economics with Senator Stoker recently I am stunned and disappointed that our Government (who most of us supported in the last election) have not acted to disband this corrupt, unethical, ignorant and sociopathic organisation.
FASEA = Corporate MAFIA