The Financial Advisers Standards and Ethics Authority (FASEA) has released its code of ethics guidance, FG002 Code of Ethics Guidance, to help assist understanding and interpretation of the guide.
The guide included case study examples to help understanding the code, as all of the formal obligations lie in the code’s language.
FASEA was also planning on hosting a series of consultation briefing sessions with educational, professional, consumer and industry stakeholders.
The code was designed to encourage higher standards of behaviour and professionalism in the financial advice industry.
The established ethical duties created by the code would go beyond the minimum requirements of existing law, and as a legislative instrument had the force of the law.
The code, including its five values and 12 standards for financial advisers, would come into effect on 1 January, 2020.
Comments
This document appears to ban life insurance commissions and asset-based fees. FASEA has given us just 10 weeks to make a dramatic and fundamental change to our client relationships. This is reprehensible, bloody-minded behaviour that will inflict serious damage on financial advice practices at a time that many of us are hanging by a thread. This is the icing on what has been a disgraceful, heartless, ignorant and self-serving 2 years from the FASEA experiment.
A 110% correct observation.
I don't think you'll find it does ban these payments 'generally'. The code is 'adviser specific' - nothing to do with the adviser's licensee and how it is remunerated.
What it is saying is that an adviser cannot be remunerated in the manner described (a percentage of the asset based fees). This is conflicted remuneration and has been banned for years. Life insurance commissions (currently) are not banned.
That's BS. Go to the bottom of page 17. It is there for all to see. A 'disinterested person' with a basic understanding of adviser remuneration would certainly say that commissions and asset-based fees COULD influence an adviser against the best interests of a client, so they are banned. The same 'disinterested person' would also say fees paid on an hourly basis are another form of variable remuneration which is open to abuse, just like the billable hour rip-offs we see from the accounting and legal professions. So presumably we cannot charge fees by the hour either. The only thing left is a set dollar fee, which couldn't be argued is variable remuneration. But of course, this is also open to abuse as clients may be charged excessive on-off fees which are not commensurate with the time involved or signed up to packages beyond what they need. So there is actually no form of charging that is pure and free of conflict. Yet this mob of academics is going to radically force clients into a new regime and disrupt the advice relationships of millions of Australians without any proper analysis of the impact on consumers.
This "Guidance" once again tries to sweep under the carpet the issue of Standard 3 completely contradicting the law. The way Standard 3 is written it effectively bans all vertical integration and commissions. No amount of "guidance" can change that.
FASEA Standard 3 was created by the zealots at FASEA to impose their own views about what they would like the law to be. With ASIC now responsible for FASEA Code enforcement, it will be enforced literally to the Standard wording by the zealots at ASIC. Advisers who fully comply with the letter and spirit of the current law, will be persecuted by zealots who think the law should be something else. Democratic parliamentary process has been hijacked by unelected bureaucrats.
Jane Hume (on behalf of the parliament) needs to seize back control from the bureaucrats and get rid of Standard 3 right now. The Best Interests elements of Standard 3 are already well covered by other standards and laws.
Just read FG002. Sherbert appears to be right and FASEA didn't even have the guts to issue a press release or use straight forward language in their guidance document. Instead they hide behind a bullshit motherhood statement buried at the bottom of page 17, which introduces a 'disinterested person' test, which financial planners will have to decipher before they realise all grandfathered commissions are banned 12 months early, all life insurance commissions are banned and even asset-based fees are also banned, with just 75 days notice! Even fees charged on an hourly basis could be banned, as they can be abused in a manner inconsistent with the best interests of a client, as we have seen with accountants and lawyers. This FASEA organisation is a cruel beast with no concept of the real world. I guess this is what you get when you stack the board with academics.
You can only laugh - the example and guidance they've given for a referral arrangement that may provide a conflict is based on an Adviser who is also a qualified Accountant and operates a separate accounting practice. They are basically saying that if he refers his financial planning client to himself (through his accounting practice) it may constitute a conflict of interest!! You can't refer someone to yourself because that would be unethical!
By clarifying this square peg in the round hole exercise we've made it worse. As an example, if Challenger sponsor an FPA event or a similar firm pays money to the FPA (via the professional partner program) and then I have a choice as to whether I use a Challenger Annuity or a CBA Annuity,, then as an FPA member....do I have a conflict? I believe a Solicitor could easily say you'd have a conflict and therefore FPA members are going to be in breach of the code if things go balls up. Remember the code monitoring body is now a Government body most likely to be headed up by ex Union Super fund heavy weights. If I was a Doctor I would not want my medical association to be getting money from a Drug Company and then, I the Doctor, be recommending those same drugs and have an external code monitoring body that hates Doctors, saying no conflicts.
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