The Financial Adviser Standards and Ethics Authority (FASEA) could have conducted a pre-release consultation around its code of ethics guidelines with the major financial adviser groups but chose not to do so.
Instead the authority has run into a barrage of criticism from individual advisers and the Association of Financial Advisers (AFA) and is now offering a consultation process in November.
However, AFA chief executive, Phil Kewin has told Money Management that he has concerns about the effectiveness of a consultation process in November when the code of ethics is due to be implemented in from 1 January.
Kewin was commenting after he signed off a communication to AFA members in which he said the AFA had used code of ethics guidance released last Friday to go beyond its remit with respect to the management of conflicts of interest to “create its own laws, way above current laws”.
“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.
In a subsequent interview with Money Management, Kewin said the issues relate to the FASEA code of ethics guidance could have been resolved if the authority had lived up to an undertaking to consult with adviser groups before it released the guidance.
“Now they are promising us a consultation process in November but I have concerns about how that will work because the code of ethics is due to come into effect on 1 January, next year,” he said.
Kewin expressed particular concern about the fact that the original Standard 3 in the code, dealing with conflicts of interest or duty had been viewed as “reasonable” by advisers but that it had now been subject to substantial change.
Kewin’s comments have come amid concerns that consumer representatives on the FASEA board have been allowed to exercise undue influence.
Comments
Apparently FASEA advised months ago there would be consultation with major licensees before the Code of Ethics Guidance was publicly released, as well as the having it ready for consultation by June 2019.
This is a complete disaster. All commissions and asset-based fees must be turned off on in 10 weeks. Aside from the fact this is excessive, unnecessary, counterproductive and will cause harm to consumers, we have been given no transition period. It would take at least 2 years to work through a complete redesign of our business and then transition our clients over to the new regime. The board of FASEA should be ashamed of themselves. They are cruel and have done little to engage with financial planners and our clients. The cowardice of FASEA is evident in the fact that not one single case study in the guidance document illustrates the fact that commissions and asset-based fees must be switched off. Instead they are hiding behind a ridiculous 'disinterested person' test buried at the bottom of page 17. So we don't even have 10 weeks to prepare because licensees, advisers, lawyers and the professional associations are scrambling around trying to trying to decipher WTF this document means. If Jane Hume doesn't step in immediately, their will be carnage on 1 Jan. The job losses, capital destruction, and human toll will be felt far and wide. Not to mention the uncertainty and confusion this till create among the 2 million or so consumers who rely on financial advisers for their sense of financial security.
Who said asset based fees and commissions have to be turned off. The code only applies to individual advisers. They cannot receive conflicted remuneration. Their licensee / CAR is still permitted to receive asset based fees / commissions. If you are an adviser employed by a license or CAR and you are paid a salary you will not be effected.
Oh, so only individual advisers are f*cked then. Well that's a relief.
Why should they. This is not some self regulatory body, this is the Australian Government stepping in and regulating a sector that clearly can't self regulate itself in order to protect consumers. I'd also guess, FASEA most likely walked across the road and spoke with AMP...., they therefore got the opinions of the so called associations that claim to represent planners. Why should they consult anyway with industry! The industry conduct was exposed at the Royal Commission, advisers have had plenty to time to self regulate and we've missed that boat. Planners allowed their industry representatives (FPA/AFA) to get payments from firms appearing at the RC and that is a very valid reason why consultation should not be allowed.
It's not consultation that's needed. It's ministerial intervention. FASEA has gone way beyond its remit and is effectively making laws in contravention of those made by parliament. FASEA Standard 3 will bring absolute chaos to the financial services industry, with huge negative consequences for consumers.
Jane Hume needs to rein FASEA in, and immediately get rid of Standard 3.
How can the code say 'no conflicts', then the guide says you can do some things that are conflicted? FASEA needs to admit they code the code wrong, and go and change it, rather than put out more & more guidance.
Exactly! The guidance is a direct contradiction to the code. But I think that there are a few too many ego's who would not want to admit that the Code needs to be changed. Much better to have 100 pages of explanation...
Add new comment