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The standards authority has committed to consulting on the contentious Standard 3 of its code of ethics before it is wound up at the end of 2021.
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.”
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Comments (55)
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.
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.
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.
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.
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.
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.
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.
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.