FASEA answer holds line on code of ethics

The Financial Adviser Standards and Ethics Authority (FASEA) has sought to argue to Parliament that Standard 3 of its Adviser Code of Ethics demands no more of financial advisers than similar codes applied to other professions.

Answering a question on notice asked by Queensland Liberal Senator, Amanda Stoker FASEA has sought to hold the line on its approach to the code of ethics and requirements around adviser remuneration and conflicts of interest.

In doing so, it claimed that the code did not seek to ban particular forms of remuneration or determine that particular forms of remuneration were always an actual conflict.

It said that FASEA believed that its approach to conflict to be “both realistic and practical and in line with community expectations”.

VIEW ALL

View all

“The Code does not seek to ban particular forms of remuneration nor does it determine that particular forms of remuneration are always an actual conflict,” the FASEA answer said.

“The guidance discloses the intent of the standard and notes that advisers will not breach standard 3 merely by being a duly remunerated employee of an entity that lawfully provides retail financial advice and services, provided the provision of that advice and services are in the best interests of their client and comply with the other provisions of the Code.”

The FASEA answer said this meant that in assessing whether they had an actual conflict the advisers needed to consider their remuneration in the context of the whole of the Code and satisfy themselves that the remuneration did not impact their ability to provide advice that met the provisions of the code including that:

· the advice is in the best interests of the client;

· the fees and charges (regardless of type) are fair and reasonable and represent value for the client and are fully understood by the client

· the client understands the benefits, costs and risks of the recommendations made; and

· the advice and fee structure are appropriate for the client.

Explaining why advisers were being asked to do no more than other professionals, the FASEA answer said: “In the case of Standard 3, the ‘standard of judgement’ is one commonly applied in Australian Law and is consistent with that applied in other professions”.

“An adviser needs to assess if: an unbiased (disinterested) and reasonable person, in possession of all the facts, could reasonably conclude, that an arrangement or benefit could induce an adviser to act other than in their client’s best interest.”

It said that an arrangement that failed that test was in breach of Standard 3, adding “otherwise, arrangements are permitted - whatever their specific form”.