Submissions from consumer groups, including CHOICE, appear to have been significantly influential in the Financial Adviser Standard and Ethics Authority’s (FASEA’s) approach to Standard 3 of its Financial Adviser Code of Ethics.
The influence of the consumer groups has been made clear thanks to FASEA releasing yet another batch of submission documents – this time from the consultation process carried out in June 2018 at the height of the Royal Commission into Misconduct in the Banking Superannuation and Financial Services Industry.
And what those submissions reveal is that both CHOICE and two Griffith University academics were forceful in their views on what should and should not be allowed.
At issue amongst advice groups is how the Standard 3 of the Code of Ethics changed from:
‘You must not advise, refer or act in any other manner if you would derive inappropriate personal advantage from doing so’
‘You must not advise, refer or act in any other manner where you have a conflict of interest or duty’,”
The CHOICE submission said that the organisation supported Standard 2 that a relevant provider, “must neither advise, refer, nor act in any other manner, where inappropriate personal advantage is derived by the relevant provider”.
“The concept of inappropriate personal advantage needs to include conflicted remuneration. That is, the term should be defined within the Code as including behaviour where the adviser receives personal gain, either financial or non-financial (such as performance targets), in recommending a specific product, or volume of products invested, over another,” the submission said.
“The FoFA reforms removed many of these personal advantages, but some still persist. The consequences of not including conflicted remuneration within the definition of ‘inappropriate personal advantage’ will simply mean a continuation of the status quo, and prolonged consumer harm,” the CHOICE submission said.
At the same time, Griffith University’s Dr Hugh Breakey and Professor Charles Sampford argued for the inclusion of a standalone Standard strictly prohibiting conflicts of interest, stating such a measure was critical for several reasons.
Their submission argued that the “removal of any and all conflicts of interests helps demonstrate and communicate the profession’s ethics to the wider public. It is a tangible reform that is visible to and understandable by the wider public, and will assist in rebuilding trust in financial services”.