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”.
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.