The Association of Financial Advisers (AFA) has said it believes the education authority’s consultation on amending Standard 3 of its code of ethics is a genuine process.
This followed earlier comments that the Financial Adviser Ethics and Standards Authority’s (FASEA’s) consultation paper suggesting it had preferred the second option it provided the industry with on changes to Standard 3.
AFA general manager for policy and professionalism, Phil Anderson, said he believed the consultation was a genuine exercise and encouraged advisers and those in the financial advice industry to make submissions.
“Most of us would favour the first option and FASEA have provided alternatives for others to express their view on,” he said.
“There’s four weeks of consultation so we should get an outcome before the end of the year because they’ll no longer have power in 2022. They’ll need to register a change to the legislative instrument and get that legislative instrument registered by the end of the year.”
The first option given by FASEA to amend Standard 3 was: “You must only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest”.
Anderson said the AFA wanted FASEA to be clear that this would apply when there was a material conflict and not for incidental or peripheral conflict.
“In terms of the guidance, want to be very clear that it says, for example, that life insurance commission’s don’t invalidate that point about reasonable and inducing someone to act in a way that’s inconsistent with the best interests of the client,” he said.
“It’s good that they are looking at making a change, and if option one is the outcome then at least it’s a much better outcome than Standard 3 as it is now as any conflict is a breach of the standard.”
Anderson noted that even if the Standard was enacted as it was currently worded there was room in the guidance to do what was currently permitted by law, which was to be paid a commission for life insurance advice as long as the advice was consistent with the best interest of the client.
