Four years after the release of the Financial Planners and Advisers Code of Ethics, the CEO of the Association of Financial Advisers (AFA) voiced the grievances shared by many advisers in a lengthy article posted on LinkedIn on Saturday.
“It would have been ideal if the entire profession had been able to get behind the code back in 2019 and fully support it. That would have been a really important outcome and given us all a level of focus and direction for the future. That, unfortunately, was not the outcome and it remains the case today,” Mr Anderson wrote.
Much of the dissatisfaction with the Code, he said, has been directed at the “idealistic”, but “completely impractical” requirement in Standard 3 that “You must not advise, refer or act in any other manner where you have a conflict of interest or duty”.
“We all know that it is impossible to remove all conflicts of interest,” Mr Anderson said.
That, he explained, “would stop a surgeon from recommending an operation and also doing the operation”.
“We also know in financial advice that charging an hourly rate or even a flat fee does not remove all conflicts,” he said.
Mr Anderson highlighted FASEA’s attempt to provide guidance on how to comply with Standard 3 before it eventually undertook a public consultation on the conflict of interest standard, but then ultimately declined to do anything to fix it.
“A number of other stakeholders have complained about Standard 6 and the potential limitations on providing limited or scoped advice, which we believe is a genuine concern,” Mr Anderson said.
Another area of the code that the CEO thinks also needs to be looked at and “simply fails to reflect reality” is the introduction.
“In the first sentence, it talks about financial advisers refocusing from providing commercial services to acting as professionals. I think many advisers would find this offensive and would have in 2019 when it was issued,” Mr Anderson said.
Another sentence that stands out to him is the following: “While the ‘ethos of the market’ legitimises the pursuit of self-interest through the satisfaction of others’ wants, the ethos of “the professions” aims to secure the public good through the subordination of self-interest in favour of serving the interests of others.”
“This reference to the ‘ethos of the market’ and ‘professionals subordinating self-interest’ does not align with reality,” the CEO said.
“I am not sure if the author of this has seen a medical specialist recently. What they charge gives no indication that they have subordinated self-interest,” he opined.
Ultimately, Mr Anderson stated that a “supported and agreed code is important”.
“I fully appreciate that being recognised as a profession bestows certain privileges and obligations on financial advisers, and acting in the interests of clients and considering the interests of the community as a whole are very much central to that,” he said.
“It is important that the Code of Ethics is fixed and that we can all get behind it and encourage a strong emphasis on the behavioural outcomes that it demands. I am sure we would all like to see the Code of Ethics Version 2 designed and delivered in 2023.”
Treasury is expected to consult on the code next year.
While the Code is poorly written, it is not unworkable. To suggest that Standard 3 is unworkable because it means advisers can’t be paid is absurd and shows how childish these so called leaders of AFA/FPA are.
Fancy comparing how medical professionals charge with how advisers charge. Doctor’s are part of a profession going back 100’s of years, but financial advice isn’t even formally recognised as a profession (why FPA or AFA have not done this beggars belief). Most financial advisers still recommend products their employer makes money from (and yet people like Phil pretend this is not a conflict of interest). Doctors don’t charge an ongoing percentage based advice fee based on how much you weigh. Doctors don’t get commissions of products they use.
I don’t for a minute think doctors are perfect, but the whole reason the industry is in this mess is the conflicts of interest that abound through advisers working for product providers…and yet AFA are seemingly ok with the QAR recommendations which will make it easier for the product providers to pretend they are giving advice in order to get more people into their products.
The big problem with the industry isn’t the Code, but the fact the industry’s two peak bodies are corrupted by having the product providers as their “partners”. While I don’t agree with many of the positions taken by Peter Johnston, at least he advocates for advisers.
If Phil Anderson wanted to do something for advisers, he should start by convincing Michelle Levy, et al that good financial advice is not episodic.
Stop comparing us to other professions, until we get a unified education uplift we can not be considered in that category.
The Code of Ethics should be handed over to a board of qualified, experienced, practicing financial planners. Until then, idealistic bureaucrats who don’t have a clue will continue to damage our profession and make it impossible for consumers to access affordable, quality financial advice.
whats the point in spending money changing code details when no one is actually policing it? All your doing is creating more work for those that do the right thing the other could not care less and they are the targets
Problem still remains Phil, that no matter how the academics & bureaucrats eventually redefine FASEA, the reality is that for every crooked Adviser that has been delisted by ASIC in the past 10 years, have never read, sat for an exam, and in fact could not give a hoot about FASEA. So, any future FASEA regime will only be preaching to the already converted, and the “bad boys” will continue to give the industry a dubious reputation. I recently resigned after 40 years in the industry, and ALL my qualifications were greater than 10 years old, but at my age (75) I was not prepared to go back to Uni. And worst of all, is that many of my loyal client’s cannot believe that I have suddenly become unqualified to give advice. Sadly, I have to do a “John Wayne “, and jump onto the back of my horse, and ride off into the sunset.
Time to get this fixed properly, keep fighting the good fight Phil.
Scrap the code. Focus on Best interest duty.
Send it packing with Scomo.