FASEA code cited as differentiator between advice and sales

The founder and managing director of a financial planning firm which has twice been named the Financial Planning Association’s Professional Practice of the Year has backed the Financial Adviser Standards and Ethics Authority (FASEA) code of conduct as being a core differentiator between those giving legitimate advice and those making sales.

Capital Partners founder and managing director, David Andrews said the new code of conduct “will create a clear division among existing advisers”.

“For one group, those who have always acted in their clients’ best interests, it will largely be business as usual. These are the committed professional advisers who take great care to ensure their advice is thoroughly researched and implemented,” he said.

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“For the other group, product salespeople, life as an adviser just became very hard indeed.  The federal government’s standards body FASEA, requires all advisers to abide by the values of trustworthiness, competence, honesty, fairness and diligence. In addition, they must meet the 12 standards set out in the FASEA code,” Andrews said.

He said that for anyone outside the financial planning industry, the new FASEA Code read like common sense.

“It is based on the fiduciary rule which dates to English law in the times of Charles I.  It recognises that financial advisers accept a fiduciary duty on behalf of their clients, and in doing so are required to act first and foremost with the needs of their client in mind,” he said.

“As part of this rule, strict care needs to be taken to avoid any conflict of interest.  The only conflict an adviser can legally have is that they need to be paid for their services, and so will need to clearly explain, document and gain agreement from the client each year for the fees to be paid.”

“There’s a lot to like about these new rules, and other than some of the detail, there’s very little to argue about.”

He acknowledged that the result of the new FASEA standards had been the exodus of thousands of existing planners from the sector with many retiring early, and “others simply unwilling to rise to the new standard”.

“This can only be good for consumers in the long-term,” Andrews said.




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If Andrews' interpretation of the FASEA Code was the only interpretation, then that would be fine. But unfortunately there are as many different interpretations as there are advisers, regulators, and sideline commentators. The FASEA Code is extremely ambiguous. Not even FASEA CEO Stephen Glenfield can provide clear and consistent interpretations of it.

At the end of the day it doesn't matter how Andrews, Glenfield, or any individual adviser interprets the code. The only interpretations that count are those of enforcement agencies such as ASIC, AFCA, and the Courts. And for as long as those agencies are staffed by biased zealots hellbent on eradicating financial advisers from the planet, the FASEA Code will be interpreted in whatever way delivers that end.

Good luck "avoiding" conflicts of interest. The greatest ethical failing an adviser can exhibit is to claim that they are free of conflict as, if they claim to be free of conflict they are not recognising and managing it.

Andrews' commentary is utter nonsense. Anon above is right on the money regarding ambiguity and zealots. To suggest otherwise is incredibly naive and smacks of not understanding what is being read, and a sales pitch of a special sort. The detail matters more than anything, and FASEA has only been forthcoming with it reluctantly.

There are a few problems with FASEA. The main one is that Product Sellers can (without any formal qualifications other than a 2 day General Advice seminar) are allowed to "advise" clients on the exact same strategies and products as advisers. These sales people dont have to have any of the qualifications/ongouing training/Professional Indemnity insurance/compliance and mot importantly Necessity to adhere to the Best Interests Duty. Why would anyone want to be an adviser when the client can get exactly the same outcome under General Advice just without all the expenses and time wasted on compliance/training/eductaion.

The other major problem is that it doesnt see years of experience as worht anything and advisers who have been advising for 20 years are forced to waste time and money on a TOTALLY WORTHLESS piece of paper.

As everyone in the industry knows. Full advice will only be accessable to the wealthy (top 5%) the rest of the population, who actually need financial advice, will be left to do their own research and pick through the lies and half truths of the product sales people.

Whilst many, if not most agree with Andrews in principle (and Money Management's own survey confirmed this), there's been significant discontent with the way FASEA have handled /mishandled their responsibilities. Anon summarised it well. If you want to talk about conflicts, look no further than some members of the FASEA Board. As for “others simply unwilling to rise to the new standard”, this is true in some cases, but FASEA themselves in some instances can't consistently interpret their own standards. And as an example of the new standards, why is it that advisers have to complete both the FASEA exam and up to 3 bridging courses covering the same content, of which the FASEA approved AQF8 level bridging courses themselves have 3hr closed book exams run under similar conditions to the FASEA exam. This is duplication of assessment and some view this as an unnecessary cash grab. Advisers don't object to raising standards, but have one or the other, particularly if they are assessing the same content at the same standard. As for "transparency", why won't FASEA release the responses to the consultation process from 2018? Why won't FASEA release details of the commercial arrangement they have with ACER? If advisers are paying $594pp per exam sit to ACER, then why have FASEA allocated $millions to administer the exam? No wonder some are saying this is just a cash grab.

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