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.