Advisers have delivered a sceptical welcome to the Financial Adviser Standards and Ethics Authority’s (FASEA) release of the draft code of conduct resulting from its industry consultation process.
The draft code, released on Monday, resulted from FASEA’s consultation with key industry stakeholders over the past 12 months but initial feedback delivered by advisers to Money Management suggests that they remain suspicious of the process.
However, the new draft code does seek to create greater clarity around key issues and particularly with respect to the contentious Standard 3.
One problem for advisers is that they or their licensees have less than a month to respond with submissions due to close on 2 November.
The draft also seeks to bring greater clarity around the treatment of clients and referral arrangements between accountants and advisers, the status of referral fees and the issue of which clients can and cannot be regarded as wholesale clients.
However, while there are some clearer explanations, Standard 3 looks likely to remain the subject of significant debate within the financial planning industry in circumstances where on the one hand it says that it does not preclude any particular form of remuneration but, elsewhere, states; “certain forms of remuneration will always fail to meet the requirements of the Code of Ethics.
“Advisers will not breach Standard 3 merely by being a duly remunerated employee of an entity that lawfully provides retail financial advice and services, provided the provision of that advice services is in the best interests of the client and complies with the other provisions of the Code,” it said.
Stakeholders have until 2 November, this year, to respond to the draft code.
Comments
More rubbish bureaucratic moronic Unreal world Unethical drivel.
The updates haven’t made a single thing clearer. They simple make an extension to every situation and say it must be in the clients best interest.
There is zero recognition of this FARSEA process or approach.
Everything under the sun in the REAL World is still conflicted or Unethical.
These morons will not listen to real advisers and continue their Canberra bubble BS.
This article is inaccurate. There are no "tweaks" or changes to the Code. It is purely non binding, wishy washy, ambiguous, "guidance" from FASEA.
"Tweaks" to the actual Code are exactly what is needed, particularly Standard 3. But that has not happened, in spite of a tsunami of feedback that the Code in its current format is unworkable. Hume needs to step in and fix this disaster now.
Who has welcomed this guidance document? Who? I have read it. It's a complete farce. The disinterested person test has become even more farcical than it was before.
Glenfield and the board should be ashamed and embarrassed with what they have dished up. What benefits have they delivered to consumers? Advisers are leaving in droves, fees are going through the roof, insurance-only advice is almost non-existent, low and middle income earners are finding it impossible to access advice except sales-driven, conflicted, fake advice from aggressive, product flogging super funds funded by secret commissions taken from members who mostly don't receive any service.
Eventually the Government will wake up to the damage FASEA is inflicting on consumers. They will replace the board with a majority of experienced, practicing advisers (which is what they should have done in the first place). The only question is how long it will take and how much damage will this current mob be allowed to inflict on the Australian public before it happens.
Resign now Glenfield and shut down this joke of a department! You pat yourselves on the back cos no-one else is.
THE FASEA CASE STUDY YOU WON'T READ
Example 3. As an adviser I become aware of a new product & agency arrangement which is equivalent in terms of benefits and features to an existing product. In this new product I can earn intrafund personal advice salaries & bonuses, whereby I am remunerated without having to seek the client's informed consent and they cannot "Opt Out" of those fees that I can be paid. The new product has a similar fee structure which would benefit one or more of my clients. Am I required to upgrade the clients to the new product?
Answer: The adviser would be acting with integrity, in the best interests of the clients and within the intent of the intrafund legislative carve out in recommending a product upgrade to this intrafund advice product, whereby you can receive these bonuses as a tied agent, whereas another retail adviser would be fined for doing this.
So the product itself is more beneficial to the client, and in addition they have the ability to receive basic advice on the product held at no additional cost to the $1.50 or so per week (which also funds other administrative services such online capability etc utilised by the client). That seems a tick for member best interest?
Are you saying you have no other concerns about the product and your advice but for the fact that you don't receive salary and bonuses for recommending the product? Or is the concern that there is a structural issue in the industry where the client is now paying for your services on top of the $1.50 or so per week for which they could receive advice about the product from the product provider directly? Im confused to which bit is your ethical issue?
Not answering for Steve but ME, the Superannuation Funds you talk about charge more than the $1.50 admin fee. The point is, the Trustee is paying for the advice, the Trustee is charging for the advice, and the member may not even use the advice and i would suspect most members have never used the advice or the service in which you talk about. If the Advice is so beneficial to the member, then the member should be charged for the "Advice". Simply charging all for advice to retain a members interest is a classic fee for no service, a fee that the member can not opt out of. Any advice delivered under this model I feel is conflicted - remember, ASIC and consumer groups have all said that product providers paying for advice is conflicted advice).
It may well be in the interest of the trustee to deliver this advice and I am sure these Trustees will fight tooth and nail to keep it, otherwise these clients would have to seek advice from an Financial Planner for a fee and the Trustee just might loss the FUM.
If a retail adviser did this, some courts would regard such "collective fees" as theft. Perhaps its time 10,000 retail advisers organised a Class Action in relation to Opt Ins etc being a restraint of trade, when competitor advisers are being remunerated on a collective basis, without informed consent & without Opt Ins being required in order to get paid.
Your opening statement is incorrect. The product in the case study is equivalent in features & benefits, but it is not "more" beneficial. If this fund just happened to be $1.6 million in the CBUS Super Growth fund, the admin fees would be $13,600 pa ongoing (not $1.50 per week). So out of that $13,600 pa CBUS will include the intrafund personal advice fees that this client may never receive. Worse still, if they wanted to "Opt out" of those advice fees, they cannot. To say that the client provided informed consent for those fees is misleading at best (given ASIC forced the industry funds to reveal those fees as separate line items a year ago), and there is no opt out provision, as exists in other competitor funds. Also, many of these industry funds are outsourcing this personal advice to external firms (ie Link Advice), so this advice is not direct, and advisers are being paid bonuses for providing this personal advice. This is weasel words, hiding a scam - that few in the industry really knew about, until a year ago. One thing is for sure, most fund members have NO IDEA they are paying these ongoing intrafund advice fees. When they discover they are, they are ethically shocked they are being charged ongoing fees for no service (in most cases).
So this is the outcome of 11 months of industry "consultation". Just 34 pages.
Wow - Standard 5: APL Considerations on Page 24 of the FASEA document.
How will that be applied to intra-fund advice?
Add new comment