Up to 57% of financial adviser practice income is being placed at risk by the Financial Adviser Standards and Ethics Authority’s (FASEA) approach to the Code of Ethics, according to the Association of Financial Advisers (AFA).
In a communication to advisers to be issued this week, AFA general manager policy and professionalism, Phil Anderson said that the FASEA board appeared to have chosen to use the code of ethics as an opportunity to rewrite the law.
“As a result, the entire financial advice sector is left completely uncertain as to what will be permitted under the code and what will not, with less than two months until commencement and no obvious way to fix this problem,” he said.
“With all forms of commissions and asset-based fees now in doubt, 57% of financial adviser practice income is at risk, as a result of this version of the Code of Ethics. This will impact both financial advisers, but also their clients, who might be forced to change their adviser’s remuneration arrangements at very short notice.”
Anderson said the AFA was concerned that the code was putting at risk the ability of advisers to provide cost-effective scaled advice by mandating the requirement for a much more comprehensive understanding of the client’s personal circumstances and likely future circumstances.
He said Standard 3 on conflicts of interests was completely inconsistent with long-established requirements to manage and disclose those conflicts, and a ban on the receipt or provision of referrals would fundamentally challenge existing practices and impact on the flow of new clients.