The AFA has intensified it efforts to further delay the proposed FASEA Code of Ethics and will argue such at a meeting with the Authority today. According to the AFA, of particular concern is Standard 3 of the Code, which relates to “conflict of interests”. The group has used revenue data to illustrate that the implementation of the Code “as it currently stands will place in doubt – place at risk – 57 percent of practice income.
Phil Anderson, the AFA’s general manager for policy and professionalism said the code of ethics guidance that was released (only) last month has provided little insight into the requirements of the code of ethics or direction for financial advisers.
Anderson and the AFA are seeking greater certainty, clarity and less ambiguity around the actual wording of the code which they say raises potential issues. He says there are deficiencies within the Code and its guidance notes, rendering it unworkable in its current form, and as such, the commencement of the Code should be deferred until it can be ‘re-worked’.
Standard 3 of the code was cause for particular concern, with Anderson noting “Standard 3 on conflicts of interest is completely inconsistent with the long established requirements to manage and disclose conflicts of interest. Conflicts are very common in financial services and exist in ways that do not disadvantage clients. They cannot be completely eradicated, and an outright ban would be entirely impractical.”
Anderson said “We were seeking much greater certainty through the guidance. We wanted to see a clear explanation of the situations where financial advice would be compliant. We wanted certainty that commissions on life insurance advice would be permitted.”
In a detailed paper to members that was critical of the code and the process of its implementation, the AFA noted that based on revenue figures released by Investment Trends, up to 57% of financial adviser practice income is being placed at risk by the code as it currently stands. This included revenue related to grandfathered trail commissions, life insurance commissions and asset-based fees for service.
Anderson accused the FASEA board of unfairly “re-writing the law” in a manner which went over and above its responsibility and ability to do so, rather than taking the opportunity to “provide sensible guidance to the financial advice community with the development of a Code that is both practical and consistent with the best interests of clients.” Anderson concluded “the financial advice profession has no choice other than to oppose the Code of Ethics in its current form and ask the Government to deliver a delay in the commencement, whilst these critical issues are resolved.”