Advisers must have ethical thick skin
Financial advisers must develop an ethical thick skin that allows them to refuse to practise in certain ways as members of the profession, even if they are part of a large institutional licensee.
Such was the recommendation of The Ethics Centre executive director, Dr Simon Longstaff, who told the 2015 Association of Financial Advisers conference in Cairns that every member of the financial planning profession was bound by a public obligation and licensees should not stifle them or prevent them from fulfilling that.
However, he noted that it was easier for sole practitioners or those in partnerships to maintain that ethical thick skin because their decisions were within their own control.
"But if you go into an institutional setting, then there's a whole complex range of things which may not be anything to do with your financial advice world," he said.
"It may be to do with other institutional arrangements that are going to have an impact on you, including the drive of a listed company to secure certain amounts of dividends and all the rest. It becomes more difficult then if those things are not in alignment."
However, Longstaff argued other professionals in accounting, law and engineering managed to maintain their obligations, even when their corporate settings prevented them from doing so.
"You've got to get financial advisers in a position where people say: ‘We'd never ask you to do that because we know you're not going to do it and you'll all be up in arms; not just you but your whole professional body will club us for trying to do that.'
"Secondly, you want the corporation that's involved in financial advice for itself to know that for its own enlightened self-interest, to create a basic environment where this is all possible, to put as few impediments in place as possible."
Longstaff said larger institutions at the board level and below were gradually recognising that it was not beneficial to be seen acting in a way that directly or indirectly encouraged staff to behave in a way that was inconsistent with community expectations.
"I see lights going on in both places. I know there are some institutions that feel they have as much of an individual interest in getting everybody else around the table as any practitioner would and vise versa," he said.
AUTHOR
Malavika Santhebennur
Recommended for you
As the industry navigates the fallout from recent product failures, two major AFSLs have detailed their APL selection process and relationship with research houses, warning a selection error could “destroy” a licensee.
The impending retirement of financial advisers in their 50s could see the profession face significant succession challenges over the coming decade and younger advisers may not be the answer.
With a third of AFSLs being solo advisers, how can they navigate key person risk and ensure they are still attractive propositions for buyers when it comes to their succession planning?
A quarter of advisers who commenced on the FAR within the last two years have already switched licensees or practices, adding validity to practice owners’ professional year (PY) concerns.
