FASEA adviser code down to ‘collective skills of management and directors’

21 May 2020

The board of the Financial Adviser Standards and Ethics Authority (FASEA) has taken complete responsibility for how it arrived at the final version of the adviser code of ethics, stating it ultimately relied on “input from the collective skills of management and directors”. 

Amid industry rumours and speculation about who had been influential in the code of ethics development, FASEA had been asked by independent South Australian Senator, Rex Patrick to “lay out the actual internal process that FASEA went through in terms of who was involved in that final determination and how they took input from consultation and acted on it”. 

Patrick asked whether the process had been “divided into subcommittees; was it one committee by consensus; was there a casting vote from perhaps you; how did it work”. 

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In response, FASEA made clear that formulation of the code of ethics had been all its own work consistent with the requirements of the legislation. 

“The board of FASEA determined to make the code of ethics on 8 February, 2019. As part of its decision-making process for determining to make the code of ethics, the board received and gave due consideration to a range of matters including: 

  • Input from the collective skills of management and directors; 
  • Feedback from stakeholders received from two rounds of public consultation in March-June 2018 and November-December 2018; and 
  • Review and analysis of stakeholder feedback. 

“In reaching its decision to make the code the board complied with the consultation requirements of the Section 921U(6) of the act which required FASEA to consult: a) financial services licensees; and b) relevant providers; and c) associations representing consumers of financial services; and d) professional associations; and e) ASIC and the department; and f) any other person or body that the standards body considers it appropriate to consult,” the FASEA response said. 

It said that feedback received on the draft legislative instrument was further reviewed and considered by FASEA before the board resolved to make the final instrument on 8 February, 2019, ahead of a 1 January, 2020, start date. 

“In making the final instrument, due regard was had to stakeholder consultation feedback received and relevant feedback was included in the final instrument to clarify aspects of the code including the values underlying the code and amending standards relating to conflicts, best interest of the client, the effects of advice on the client and adviser record keeping,” it said. 

 

   




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FASEA sets a role of ETHICS for advisers to abide by or they will be dealt with.
Lawyers have a code of ethics and their job is to defend their client irrespective of innocence or guilt.
In other words, lawyers can lie by definition and not be held to account because it's their job.
But wo be told that an adviser should fail an ethics test!
And all implemented and decided on by a small circle of self-serving temporary sitting people.
Perhaps they should be replaced by lawyers!

I don't believe that you are correct about lawyers Rebel Adviser. My understanding is that in criminal justice, if the lawyer comes to believe that their client is guilty, but they cannot convince the client to plead guilty, they have to cease representation. It's not to say all lawyers are 100% completely ethical 100% of the time. Just like the rest of us, no-one is perfect. That is why a Code should be an aspiration more than a set in stone model for prosecution. If industry bodies had better policed their own Codes in the past, we may have been able to stick with those, rather than a legislated set of rules.

the way they get around that is to say that if you are guilty then don't disclose that to them.

And how many on that board had ties to universities or education providers ????

Or had their book on the reading list for the FASEA Exam or on the reading list for Ethics bridging courses? You may wish to ask the "Ethicist" on the FASEA Board this question.

It beggars belief that this circus has been allowed to continue as long as it has!

The Standards Director of FASEA (Constantinidis) holds no FP qualifications whatsoever according to their bio information on the FASEA website. None.
How then is it reasonable for any person lacking the necessary credentials to be involved in determining professional ethics, examination and education/qualification requirements for the Industry?

Well we all know this is utter BS. The first draft of the code was reasonable with broad support from the adviser community. They followed up with a farcical revision, which no-one in the adviser community supports and is widely acknowledged to be unworkable. Was this a deliberate tactic? Were they lulling advisers into a false sense of security with a sensible code to minimise negative feedback, before pulling out a disastrous, profession killing code at the last minute? Licensees are now imposing insane requirements on advisers and large portions of our revenue are at risk. ASIC and the future disciplinary body have been handed a weapon they can use to target, persecute and destroy any adviser, practice or licensee they wish. Costs are going through the roof and our clients are being bombarded with so much red-tape, we are forced to rely on their good sense of humour to get them through it. FASEA's conduct is so reprehensible, one can only assume the board members are using their tough stance to bolster their CV's to further their own careers. Given our deplorable representation from our professional bodies and the negative publicity from the media, we are a soft target for these white-collar psychopaths. The shrinking pool of PI insurers will soon evaporate when they wise up to the code of insanity. Unless the government urgently steps in and refreshes the board with a majority of experienced, practicing advisers, our profession is doomed; and along with it, many super funds, insurance companies, investment products, research groups, software companies and jobs for those employed in adviser practices and ancillary services.

This is without doubt the most self-serving article from the FASEA Board trying to justify their own existence. Many on the board and management might have certain skills which they contributed to the collective but how are the skills of academics, consumer representatives and an ethicist relevant to setting a code for a profession in which they have shown they have no real awareness and understanding of what we do in regard to advising our clients.
To say that they consulted with stakeholders is a joke as they went through the motions of a consultation process, but took absolutely no notice of the feedback they received and the unworkability in the real world of several of the Code Standards being proposed. The time frame for feedback was so short that it was all rushed though in the end to meet the government mandated start date. This is how the Andrews Government operates here in Victoria by giving lip service to getting feedback from affected citizens, when they have already made up their mind what outcome they want.
This is without doubt the most shambolic body ever setup by any government and should have been sacked back before they even got the Code in place.
As a well qualified adviser with a degree and diploma with 33 years experience as a Financial Planner I have seen massive changes made to how we must provide advice, but none of these have been as chaotic as this whole process of re-education and establishing a Code of Ethics on top of the already massive amount of regulations which were already in place. I still have absolutely no faith in the board or management of FASEA to do their job effectively as many of them have major conflicts of interest.

Well said Laurie, you might say FASEA didn't follow standard 3 of their code when putting together the code. You must not act where you have a conflict of interest.

Couldn't have said it better Laurie P. The current situation is a complete shambles. Might be time to draw a line in the sand, wipe the slate clean, unite as an 'Advice' industry and rebuild from scratch. Lots to consider, hugh task to take on but certainly needed because, in my opinion, unless this occurs the current situation will continue to 'burble on' eventually resulting in the demise an industry which is needed by so many Australians.

The code can't be complied with in the real world. Is anything being done to give us a code we can actually comply with? Or are we just going to continue going around in circles trying to work out how to comply with a code we can't comply with?

The code can't be complied with in the real world. Is anything being done to give us a code we can actually comply with? Or are we just going to continue going around in circles trying to work out how to comply with a code we can't comply with?

Total trash, this fiasco has been a set up from NOVEMBER 2013 when Frydenberg was our Minister to remove Advisers by starvation or intimidation. Lets just hope that the inaugural Chair does not get re elected....

This industry is being deliberately and systematically dismantled.
I have no doubt this has been a 10 year plan in the making and it is getting close to reaching conclusion.
This has been a strategic plan to break the back of the confidence, the will and the self esteem of advisers.
The destruction of good people has been just collateral damage for those whose ideology is driven by obsession.

You're on the money. There are two Treasury officials in Canberra that are fiercely anti-adviser and have been a driving force behind pushing all of these changes we have seen and will continue to see. One in particular was quoted as saying that the "FPA is the head of the snake"

Time to name names. If unelected bureaucrats are going to abuse their position like this they need to be exposed.

Who are they? I read some of the Submissions from Treasury to the RC and their anti-adviser views were crystal clear. It didn't look very professional from Treasury but they are Treasury.

Do these two Treasury officials have long left to retire or are we stuck with them for years to come?

Completely agree. Those believing this is all about becoming a profession could discover they are replaced by Intra Fund Advice. Lets face it, the Union Funds have played to destroy all competition - anyone that goes near moving money away from Industry Super is basically Financial Planners and look at our situation - no good.

Are these FARCEa clowns seriously trying to give themselves a pat on the back. I have never seen such incompetence.
And as for ethics, given most of them have a financial conflict of interest they are the last group to be talking about ethics. Complete circus!

Absolutely no consultation was given to the main stakeholders here - Advisers! How hard would it be to survey Advisers and gain their input as to the workability of any Code of Ethics? It's not that hard. Yet we have academics, and consumer groups having too much input, which all work on ideology not practicality. Not to mention an over-exuberant ASIC funding the consumer groups, and happily bombarding advisers with compliance, and persecution.

While advisers are certainly the main participants, consumers are ultimately the main stakeholders. The big problem with FASEA is that consumers interests have not been properly represented. They have been hijacked by activist groups like Choice and CALC who represent nothing more than a narrow political ideology. They do not represent mainstream consumers. The RC was also misled by these activist groups. This is why we have ended up with a situation where it is increasingly harder for consumers to access affordable, professional advice.

Australia desperately needs a genuine consumer association. Until then, politicians need to engage directly with the general public as much as possible to understand consumer needs. Listening to Choice or CALC is generating a totally distorted view. Choice and CALC representatives should be immediately removed from agencies like FASEA and AFCA. Their funding via ASIC should also be withdrawn.

The consultation was open to everyone, including advisers. The associations (FPA, AFA) actually made some really fair and reasonable suggestions to FASEA on all of the consultation papers, however FASEA ignored a majority of their feedback. Further, independent Advisory Boards under some dealer groups (representing their advisers) also made representations, with many of these suggestions largely consistent with the positions taken by the likes of the FPA/AFA etc. Once again, FASEA chose to ignore the feedback. Are you getting the picture here?

FASEA simply called for consultation and submissions to appear to be inclusive.
They knew they would be making the decisions from the start...the other stuff provided to them was simply white noise.
The makeup of the FASEA Board was far too skewed to have allowed appropriate and balanced assessment and far too skewed to allow any chance of having anything implemented that was against or in opposition to their biased ideals.
This is why Glenfield had to take questions on notice from Amanda Stoker in regard to who had input into the current COE and whether ASIC were heavily involved in the re-jigging of the original version.
This is a stitch up.

You're 100% on the money Agent 86.

I quite like the FASEA Code of Ethics. I think it is a marvellous aspirational document for how personal financial advice could be delivered. The ideals put forward are excellent goalposts for anyone wanting to join the industry, and when implemented to the fullest, would provide for the absolute best in financial planning outcomes. But only to a rather narrow slice of the community.

A Code of Ethics without a supporting legislative framework is a shaky foundation on which to build the future of financial planning. The Code is asking advisers to act as if it were their sole driving focus. IF ONLY. We all know that advisers are torn and twisted at every step of attempting to fulfil a client's objectives - simple, clear advice that is relevant, appropriate, cost-effective and oriented towards the adviser/client relationship sought by that person. The process is not simple. Making an SoA relevant is ridiculously difficult. Cost effectiveness is a joke. Regulators seem to believe that a single financial planning advice model is appropriate for every section of this wide and varied marketplace.

While I fully support the Code of Ethics as it is, I believe it is ineffective without tackling the true vested interests in the financial planning marketplace:

Vertical integration - don't even try to tell me that this is possible within the Code. I'm not against vertical integration, but unless you slice it off and give it its own set of rules, conflict-free advice is impossible. Not difficult - impossible.

AFSL's - Get rid of them. Licence advisers directly, so their sole focus is meeting client requirements within a legislative framework. If advisers want to group together for services, cost reduction, succession planning and skill sharing then fine - but forcing every adviser to choose an AFSL causes a conflict that will grind against FASEA's Code.

APL's. This is a gatekeeper process hiding behind "best practise". It's been used this way forever, and it is used as a way of minimising the requirement of advisers to compare across the marketplace. I don't care how much work you've done on selecting your nominated product - it's a bias and it brings advice down to FUM, FUA or some form of direct fees tied to these concepts.

Professional liability legislative protection - Accountants have it (rightly so) but advisers have all the accountability and none of the protections. I have no problems with some saying that advisers haven't earned it - but you can't have it both ways. If we're going to be held to higher-than-professional standards then we deserve some level of liability protection. PI will reduce, and the tension between legislation, AFSL, PI, FASEA, TCB, AFCA and whoever will ease a little, so SoA's can become more cost efficient to produce. As it stands, those tensions combine to force providers to limit product selection, research scope and service offerings. It's a block on innovation and effectiveness, reducing an adviser's ability to meet the Code requirement for Diligence.

Fix these things, and then the Code will work perfectly. Leave those things as they are, and the Code becomes a figurehead document that everyone looks up to, but few can work with.

The Code is not fine Michael. I agree with your other suggestions, but those changes wouldn't make the code any more workable. Do you personally invest into the investments you recommend to clients? If the answer is yes, you have just failed standard 3. There is no way to abide by a legal/literal interpretation of the code. So you are a sitting duck, waiting for ASIC or the code monitoring body to audit your files and then ban you for life if they take a disliking to you.

Hi Giggity. I'm struggling to see how a personal investment would bump against Standard 3. Unless your investment was material to the investment itself or the client's investment was. Materiality would be the primary issue, and if interpreted through the lens of the Codes Values then there should be no issue. One of the things about this whole ethical business, is that ethics is an arguable point. If you have a strong argument then your point is valid or holds cogency. If not, it is a weak argument or fails completely. The point is that an adviser must make the argument for their actions. That's not such a bad thing.

While I think the Code is a great document to aspire to, it falls down awfully by being so narrow in terms of the business models it allows in its current form. I'm not against vertical integration - but it has its place, and advisers under that model should be classified as operating under a clear bias to their institution. Intrafund advice falls into this area, as does any other vertically integrated model. Once upon a time, an Agent represented a company (vertical integration) and a broker represented a client (a form of "independence"). This style of clarification would benefit a lot of the community in so many ways.

Again, I think FASEA did a great job of the document; an awful job of seeking and reacting to comment and input; a terrible job of setting out a reasonable implementation timeline or process; a complete failure in terms of addressing the community needs for simple, cost-effective and appropriate advice through evidence-based analysis.

Some comments on this page are suggesting that ideology was the primary driver of much of this material, and an anti-adviser sentiment drove much of the implementation. Perhaps. I'd suggest that wealth and ignorance of community needs were just as material. The code makes sense for any person who is sufficiently educated to make their own choices; for someone who is wealthy enough to be happy to pay Lawyer level bills for financial advice and someone who's account balances justify such expenditure. The lack of evidence-based research and allowance for that in the background construction of the Code suggests the target audience is a rather narrow slice of Australia's population. A reasonable person would ask just who was expected to take up the role of helping the average person, once advisers costs were pushed into the stratosphere? Industry Super funds? Self-help books? Get-rich-quick websites and newsletters?

These are the areas in which I feel the Code has let down a very large slice of Australia's population. But I am a bit of a dinosaur, and I've been wrong before, so who am I to say such things? They're just my opinions. And it seems that many advisers out there in AdviserLand do not like people having different opinions.

Where in the code does it differentiate between material and non-material conflicts?

Not to mention the most corrupt of them all and that's the association that claims to represent them. I would encourage you to put your industry first and resign from the FPA. That's within your control and your choosing.

The response periods for round 2 of the consultation process in late 2018 were ridiculously short. FASEA weren't really interested. Fir example, the only thing changed for the FASEA exam between round 1 & 2 was a reduction in the exam reading time from 30mins to 15mins. Seriously? There were so many great ideas ignored by FASEA. As an example, the exam should have all been multiple choice to provide for a quick results turnaround, instead of the current 6 week lag. Given everyone has to do an Ethics bridging course as an absolute minimum anyway, and as those courses include assessments via activities, assignments, case studies & a 3.5hr exam covering all anyway, why FASEA insisted on the current format is beyond me!

Dear Bruce,
I think the article above gives you the answer - FASEA did not consider the feedback at all. they only looked at feedback from their staff. Our trustry government and regulator will not hold FASEA to give an account of why they referred to feedback when they did not consider it.

This Government had an agenda in late 2013 which is still there today, remove Advisers so Institutions can deal directly with consumers. Thanks to the support of the FPA/AFA with the FSC, O'Dwyer got LIF/FASEA up and they have gone through the motions of 'listening' ever since. FASEA is a conflicted disgrace and I assume that those supporting it are 'friends' of the Advisers silent enemies.

While I quite like the Code as an aspirational document, it's unworkable as an overriding statutory framework. But it's clearly intended to be unworkable, which has to be linked to a flawed agenda within FASEA. The absence of genuine consultation and a complete disregard for implementation outcomes show clear bias against the greater bulk of advisers.

I admire the efforts you have put in to highlighting advisers' points of view these past years, Peter. At some stage, the adviser-bashing will stop, but I feel there will be a lot more grief before sense and honesty return to regulation of our industry.

Michael, it was precisely designed that way by a very clever Lawyer Chair person who has been there from Day 1 [and hopefully will not be re appointed]. LIF/Grandfathering was the starvation tactics and FASEA the intimidation/frustration angle - appalling behaviour and supported by 2 Associations against their members wishes to please their financial supporters.

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