Consultations between FASEA and representatives of the advice industry this week saw criticism raised from several quarters, including from the industry associations and the licensee community. FASEA CEO, Stephen Glenfield, defended the Code of Ethics’ contentious wording, particularly “Standard 3” around treatment of conflicts and paid referral arrangements. Asked if the wording around the code would be amended, Glenfield replied the guidance around the code was subject to change, but the code itself is not.
Standard 3 of FASEA’s Code of Ethics’ prohibits advisers from advising, referring or acting if a conflict exists. Glenfield said thatit only prohibits the adviser acting in the face of actual conflicts, as opposed to potential or perceived conflicts.
Standard 3: “You must not advise, refer or act in any other manner where you have a conflict of interest or duty”
The contention comes after an updated Guidance document on the Code of Ethics was released late last month that told advisersthey would not be in conflict if they were “duly remunerated”, nor would they be in breach of Standard 3 if they shared in profits “incidental to the adviser’s dominant purpose in providing advice”.
Complaints From Associations
The FASEA board also faced criticism from the major member associations for not engaging with them for nearly 2-years, despite “persistent overtures” to do so. FPA chief executive, Dante De Gori said that his organisation had written multiple times to FASEA seeking engagement with the board but had on every occasion been referred to the executive. In a formal statement over FASEA’s handling of code of ethics guidance, it said “After two and a half years, the FASEA Board of Directors has yet to consult with any financial planning professional bodies or their members and they appear to be more interested in academic theory than making a genuine effort to improve standards in the financial planning profession for the benefit of consumers”. AFA chief executive, Phil Kewin echoed De Gori, saying the AFA has also been declined access to the FASEA board
Complaints from Licensees
Professional Planner reported that “the licensee consultation meeting on Thursday was the most antagonistic of the week, with the discourse notable for several heated statements from licensee representatives. Key issues included the short implementation time frame and the lack of distinction as to how the Code of Ethics applies to wholesale and retail clients.”
Outside of the consultation process itself, FASEA faced further criticism because advisers themselves were not part of the process this week. So far only industry groups and dealer group licensees have been invited to take part in the meetings. There will be further meeting next week including one with industry regulators including AFCA, ASIC and Treasury, and also one with consumer representatives. These will follow on from a full-day FASEA board meeting on Monday, which would no doubt provide some interesting discourse on the standards, particularly as the code of ethics is still due to become effective on January 1 next year.
Given such a short timeframe, the last hope for clarity around how the new code will be interpreted might come just days before it’s implementation. FASEA will release yet another version of the Code of Ethics guidance in December, based on the feedback it is receiving up till the 22nd of November.
Nothing like cutting it fine!