FASEA code uncertainty must end

Discussions around the Financial Adviser Standards and Ethics Authority (FASEA) code of ethics have been going on for almost three years, the code itself has held legal status since February, last year, yet uncertainty remains.

A reflection of that remaining uncertainty was FASEA’s release in early October of a further draft guide covering the code which brings the level of guidance issued by the authority around the code to nearly 100 pages and this is before the consultation process has even finished. No one should regard this as acceptable.

It is particularly unacceptable in circumstances where financial advisers are being asked to adhere to a code which has been operational but about which there exist continuing important differences of opinion about how it should be interpreted, particularly around Standard 3.

Related News:

It is in these circumstances that it is hardly surprising financial planning licensees are taking a significantly cautious approach to the code and urging that their authorised representatives do likewise.

None of this is, of course, helped by the fact that the Government chose to scrap well-advanced moves to have the industry establish code-monitoring bodies to, instead, pursue the recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services for the establishment of a single disciplinary body.

If the Government had stuck with its original plans, at least two code-monitoring bodies would already be in place and one suspects a good deal of the current uncertainty would have already been addressed.

This has not occurred and the priority being given by the Government to dealing with the COVID-19 pandemic means that it will likely be at least nine months before a single disciplinary body is established and longer still before it properly up and running.

In the meantime, the financial planning industry is being expected to muddle along living with a code of ethics which lacks final and broadly-accepted definitive guidance, an Australian Securities and Investments Commission (ASIC) which has signalled a largely non-interventionist approach and a FASEA which has clear funding only up until the next Federal Budget in May, 2021.

The future of FASEA is uncertain not only because of the eventual establishment of the single disciplinary body but because this month’s Budget papers provided funding guidance for the authority only up until next year’s Budget.

Of course, it would make good sense for FASEA to be subsumed into a single disciplinary body and from a political perspective this would allow the Government to conveniently deal with many of the issues which have surrounded FASEA, particularly ongoing industry criticism of its board and the manner in which the organisation has gone about its task.

But nine months is a long time in both politics and the financial services industry and the absence of single disciplinary body and the certainty it would bring is unacceptable notwithstanding the revised timetables outlined by the Government and the assurances issued by the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, most recently at the Association of Financial Advisers virtual annual conference.

As things currently stand, it will be at least the second half of 2021 before the final building blocks are put in place and there is every chance that Australia will be in the midst of the run-up to another Federal Election campaign.

The industry needs more certainty than this.

Recommended for you



Given the reported ongoing widespread dissatisfaction with FASEA's handling of the implementation of all the Professional Standards and in particular the Code of Ethics; lack of trust in certain members of the Board (past & present) and the blatant lack of fairness in a handful of licensees now subsidizing the whole advice industry to keep FASEA running, several cats can be skinned at once if the Government dismantled FASEA and subsumed its functions into the new single disciplinary body. It's an opportunity to start fresh, and win respect back from an industry that is sick of paying for poor decision-making and the cost of "over-regulation" which is supported by a plethora of fees paid to various government bodies for little consumer benefit. Indeed, all of this duplication and multi-regulator requirements simply add to the cost of advice and act as a barrier to those seeking advice who need it the most. WIN-WIN for all.

The big danger with this course of action is that when FASEA is wound down, the single disciplinary body then has to enforce the badly designed educational standards and Code of Ethics developed by FASEA. By all means power should be transferred away from the incompetent and conflicted people running FASEA, but their legacy of badly designed standards and Code should not be allowed to live on.

FASEA must be completely overhauled right now while it still has funding. The standards and Code need to be fixed right now before they are handed over to a new body for enforcement.

I agree Anon. The legislation covering the powers of the SDB can cover an updated version of FASEA's powers, coming the same areas, but with more common sense/practicality. I assume there would be consultation on the new body, and hopefully Treasury will listen to the industry. FASEA will never "lobby", for any changes, as that would undermine their own credibility ans an admission of failure, and we can't have that now, can we?

Yes it is becoming obvious that a clean sweep is needed along the lines you suggest.

As much as I would like greater certainty, in some ways I would like the pig-headed FASEA directors to maintain their bloody-mindedness and ignore the pleas from advisers. This will increase the odds that FASEA will be scrapped altogether and replaced with a new organisation within the single-disciplinary body with advisers having greater control (like every other profession has). That is certainly the impression Jane Hume is conveying. I for one would be willing to endure another 12-18 months of uncertainty if it increases the odds that the FASEA farce is put down like the crook dog that it is.

Add new comment