Earlier this month, FASEA released the draft Financial Planners & Advisers Code of Ethics 2019 Guide, which provides an explanation of the intent and application of the code’s values and standards. FASEA has invited industry feedback on the draft guide up until 2 November.
BT head of financial literacy and advocacy Bryan Ashenden said the draft guide makes it clear that standard 1 of the Ethics Code is about acting in accordance with all applicable laws including the code and ensuring that advisers don’t try to avoid or circumvent their intent.
“Where the guide discusses standard 1, it talks about advisers taking on personal responsibility to understand their legal obligations and ensuring that the advice provided [is in line with] the intent of financial services law,” Mr Ashenden said.
“What it is calling out in particular is that advisers don’t try and circumvent certain disclosures and consumer protections that consumers are entitled to receive.”
An example of this, he explained, might be stating that an individual qualifies as a wholesale accountant simply because an accountant certificate exists.
“You need to be thinking about this from a standard 1 perspective. Is it appropriate to classify that client as wholesale or should they remain as a retail client irrespective of how much money they have or what their wealth position is?” Mr Ashenden said in a BT Technical Services webinar.
Mr Ashenden said it may not be appropriate for the client to miss out on those consumer protections.
“Those consumer protections are there for certain reasons, so you really need to be able to think and consider what is the right way to approach your client,” he said.
Standard 1, he said, also has a strong focus on referral fees.
“This guidance, just like the one issued 12 months ago, makes it very clear that advisers should not be receiving referral fees going forward — so no direct referral fees coming through to the adviser,” he noted.
It also discourages advisers from setting up structures to circumvent the ethical obligations that would otherwise apply to them as individuals, he said.
“They use referrals as an example here. The code states that I cannot receive a referral fee as an individual adviser; however, it doesn’t apply to my corporate authorised representative. [I might decide] to just have the referral fees paid to the corporate authorised representative instead because if I’m not personally receiving it, then it’s not a breach,” he explained.
The guidance clarifies that if the adviser was to set up a structure like this, then the adviser is simply trying to circumvent the intent of the code, Mr Ashenden continued.
“It’s basically saying, well, if you go and set this thing up, then aren’t you just trying to get around what the code otherwise says you should be doing? So, that’s a consideration to be aware of,” he stated.
Well said!
So, in other words, ignore the empirical tests that are set out in the legislation and instead go on “the vibe”.
Isn’t that just creating more grey areas, more subjectivity, and more problems for advisors who, for years, have been calling out for clarity and simplicity in regulation?
Given that the wholesale test for superannuation product advice is $10m, in most cases, the client is treated as retail for the super strategy component. If they satisfy the wealth test exemption (via an Accountants certificate), the investment advice can be at a wholesale level.
My reading of the Code, and FASEA’s Guidance, is that it isn’t saying you are either wholesale or retail, it is saying (all the Standards are) that the adviser must apply professional judgement when facing into a client. In the case of a client that has an Accountants certificate, the Adviser must decide on what level of financial literacy the client has in respect of the advice that is being provided at the time. The consumer protections, supposedly afforded by a pure retail advice model, will not guarantee client understanding of the advice. It always comes down to Adviser professional judgement.
The industry has to move away from looking for the tick a box way to success and start embracing the spirit of the Code, which is demanding a high level of professionalism which, in time will be a real game changer.
Yeh sure Kym, and clients have to be explained and know so dam much and tested how much they understand that if they truely pass FARSEA BS Standard 5 they would do it themselves because they are so dam knowledgeable.
Their long lost Italian aunties potentially injured dog needs to be considered for care costs for its entire life and how the advice might be considered along with everyone’s Aged Care planning as Standard 6.
And better not charge anyone for Advice in any way as that’s a conflict, everything in life and Advice is a conflict and Advisers must not act, Standard 3.
As for Education, those already well degree qualified still have to waste 120hrs on FARSEAcals Ethics course, that counts for only 30hrs CPD and then because the way the course is accredited it doesn’t even count for 30 hrs of FARSEA’s annual CPD. How 120hrs study can equal less than 30 of 40 CPD hrs is beyond a joke.
Good luck any Adviser in front of AFCA, it’s literally impossible not to be exposed under multiple Standards and Values and client wins any and every complaint.
As for FARSEA’s board, they fail every single Value and Standard they impose on Advisers. Corrupt and conflicted along with their disgusting ASIC buddies.