AFA, FPA welcome ASIC hands-off code monitoring approach

26 November 2019

The Association of Financial Advisers (AFA) has welcomed the corporate watchdog’s approach to the Financial Planners and Advisers Code of Ethics 2019 as it gives the standards body an opportunity to engage in genuine consultation for the code.

The Australian Securities and Investments Commission (ASIC), today said it would not be monitoring or enforcing individual adviser compliance with the code.

AFA chief executive, Philip Kewin, said: "FASEA [the Financial Adviser Standards and Ethics Authority] now has an opportunity to engage in genuine consultation to ensure the Code sets the appropriate standards while at the same time being realistic.

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"The AFA will continue to work with other professional associations and stakeholders including the Government, regulators and FASEA, to arrive at sensible outcomes that deliver trust and ethical standards that meet and exceed community standards.”

Kewin said the AFA still had a number of concerns and particular the practical workability of Standard three around conflicts and the guidance around standard seven, benefit payments and fees but noted after consultation with FASEA, ASIC would take a facilitative approach to compliance until the new single disciplinary body was operational.

“We will continue to advocate for changes to Standard three and further guidance across the board, in particular with respect to Standard seven and scaled advice,” Kewin said.

The Financial Planning Association (FPA) also welcomed the approach and in particular the ASIC guidance to licensees on their expectations of how licensees must support financial planners' compliance with the code of ethics, including facilitative compliance in relation to Standards three and seven of the code

FPA chief executive, Dante De Gori, said: “The FPA’s advocacy work has raised concerns in relation Standards 3 and 7 and the short time frames with which to comply. We welcome today’s announcement from ASIC which acknowledges these Standards require significant change, and we support a facilitative compliance approach to this.

“We have expressed our concerns that these two Standards – which relate broadly to conflicts of interest (including fee and business models), remuneration models, referral arrangements, and gaining client consent from existing clients – need more clarification.

“It is important to note that facilitative compliance means ASIC will adopt a measured approach where inadvertent breaches arise or systems changes are underway, provided industry participants are making reasonable efforts to comply.”

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How is this helpful? Are the AFA mad? If a licensee is passing through life insurance commissions and asset-based fees to self-employed advisers, this will be a systematic breach of Standard 3. It is there in black and white on page 17 of FG002.

What ASIC have basically said is until the Code Monitoring body is formed, Licensees will be required to supervise the code. Given AFSL's have a clear vision of our revenue and in most cases, collect and distribute our revenue to us, we are all stuffed. Have the AFA read the bloody-minded letter ASIC and APRA sent to super fund trustees about adviser fees? ASIC are in a destructive mode. They want to inflict harm on advisers and they are so deluded, they think anything that harms financial advisers is good for consumers.

All it will take is one letter like that, sent to Licensees, and they will destroy hundreds, possibly thousands of small advice businesses.

If the AFA don't understand this, what hope have they got persuading our politicians to intervene?

This article has change since my original post. Now the FPA are also on board? What is going on here? If a Licensee passes through asset-based fees and life insurance commissions to a self-employed financial planner, it is a direct violation of standard 3. This is not 'inadvertent', it is a systemic problem and ASIC will be able to shut them down. ASIC's press release confirms this. But regardless, the fear of such action will be enough for Licensees to switch off all such revenue which will destroy small businesses who have been given almost zero notice. The FPA and AFA should be raising hell and pushing for ASIC/FASEA/Hume for a 'No Action' policy until this is sorted out and if they do proceed with such nasty measures, an adequate transition period must be incorporated into the policy.

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