AFA accuses FASEA of going beyond its remit on code

The Association of Financial Advisers (AFA) has accused the Financial Adviser Standards and Ethics Authority (FASEA) of utilising its code of ethics approach in a manner “tantamount to FASEA creating its own laws, way above the current laws”.

Responding to FASEA’s Friday release of guidance around its code of ethics, the AFA said the exercise had simply served to increase industry concerns and urged that changes and clarifications were needed for the code of ethics to be workable and practical.

The AFA specifically referred to FASEA’s announcement that: “The making of the code and changes to education and training standards, reflect community expectations that the provision of professional advice be centred on serving the best interests of the client free from any conflict”.

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 In a communication to members signed by chief executive, Phil Kewin, the AFA said the statement was “tantamount to FASEA creating its own laws, way above the current law”.

“We simply do not understand how it is possible, when the Corporations Act only requires conflicts to be managed, and the law specifically permits life insurance commissions and other conflicted arrangements, that FASEA could issue a Code of Ethics, that is binding on all financial advisers that appears to completely ban conflicts of interest,” the AFA communication said.

“Any expectation to totally remove conflicts of interest is simply impractical. FASEA clearly do not understand the extent of conflicts in financial services, the impact that their removal would have, or appreciate how conflicts are managed to ensure that advice is provided that is in the best interest of the client. Conflicts exist in many different ways and not just with respect to remuneration.”

The AFA said that as 1 January drew closer, it would be consulting with FASEA to advocate for change and to ensure greater clarity, including:

  • Seeking a blanket statement that the receipt of a commission for the provision of advice on life insurance is acceptable;
  • Clarification and greater flexibility with respect to referral arrangements; and
  • Clarification regarding the need to obtain consent from existing clients as soon as practicable, in order to continue to receive remuneration.

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I think the AFA has a point. FASEA got this wrong from the beginning. The additional guidance is not helping. They should tear it up and start again.

Ken Hayne called for fewer laws and simpler regulation. This Code does the opposite. It adds yet another layer of rules which muddy the waters and distract advisers from the only thing that really matters - providing high-quality, meaningful financial advice to their clients.

I am too busy being compliant. i don't have time for anything else sorry.

There has been more clouding rather than clarification. Confusion rather than guidance. Typical of those who don't understand the realities of advice and the LAW.

This whole exercise is a complete shamozzle. Joke !

....and we thought Brexit was handled poorly !
You simply cannot fathom how on earth the management of financial services legislation and regulation has arrived at this point.
The very apparent lack of understanding and of practical application in the provision of advice by FASEA is nothing more than grossly negligent.
The level of contradictory complexity is entirely unworkable.
FASEA have failed and now must re-think this whole mess as to how this can possibly work in practice and so that every time an adviser does anything, no matter how careful will be putting their head on a chopping block.
What an abysmal mess.

So in what context were we assessed in the FASEA exam in September 2019 sitting? Are those that sat the exam being tested on the old FASEA code or this new one?

Thanks to the AFA for providing a voice of reason.

On top of commissions, the Code also bans asset-based fees (see page 17 of the guidance document). But rather than being honest about their intention, they have banned them with a rather cryptic motherhood statement, and they didn't include a single case study which highlighted their intent. It almost seems like they want financial planners to drift along over the next 10 weeks without realising their entire revenue stream (in many cases) must be turned off, with the advisers forced to rebuild their businesses, by reaching out to all of their clients to re-negotiate new arrangements. For those of us without the cashflow to survive such an event, it will be game over, with massive job losses. I hope the AFA and FPA have a good relationship with Jane Hume because this is an unmitigated disaster.

Swings and roundabouts - AFA standards for advice professionals was way below the Corporations Act intent. FASEA is making up for AFA being so tardy in setting professional standards and so harmed the reputation of financial advisors.

Utterly irrelevant to the topic being that the 'Standards' far exceed any rational or commercial requirements set for any other profession.

Even lawyers do not operate in a zone of no conflict - if you have ever helped a client with an insurance claim for free, especially after a well known legal firm aimed to charge $30k for filling in a TPD claim form wrongly, or received an invoice from one itemising emails billed out at a minimum of $100 even if it is a two word answer, or any of the latest ambulance chasing antics we're seeing, then you would realise it is not about AFA's "prior standards", idiot, but rather what the future holds for all of us and to what realistic level we are expected to operate in.

The AFA never miss an opportunity to drag the bar lower and maintain the status quo. "They just don't understand". To the contrary, they do.

Nothing new here. ASIC has been making its own laws using the Corps Act as the starting point instead of the objective for nearly 20 years. That's how this whole mess got going.

Whilst we applaud the AFA's response, where were the AFA and FPA two years ago when FASEA was being implemented? The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 established the Financial Adviser Standards and Ethics Authority (FASEA) in April 2017, to set the education, training and ethical standards of licensed financial advisers in Australia. Tell us all what you intend to do from here. If you have no answer then dissolve your Association's and give members their Subscription Fees back. After January 1, 2020 - there will be no-one left to be a Member!

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