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.
“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.