AFCA To Assess Code Conduct; Advisers Dejected At FASEA

The Australian Financial Complaints Authority (AFCA) has announced how it will assess adviser conduct obligations under the new Financial Adviser Code of Ethics. AFCA will only assess adviser conduct against the Code where a complaint and the conduct has occurred after 1 January 2020. Meanwhile, adviser sentiment towards FASEA seems to have hit rock bottom…

With the establishment of the disciplinary body to monitor and enforce the Code anywhere from 18 month to 3 years away, AFCA Deputy Chief Ombudsman, Dr June Smith announced the approach that the ombudsman scheme will adopt until that point. Dr Smith was quoted in an AFCA statement as saying “Until the establishment of the single disciplinary body to monitor and enforce the Code, AFCA will take a measured and considered approach to interpreting the Code’s provisions.” Advisers concerned about the code being applied retro-actively were assured that “AFCA will only assess adviser conduct against the Code where a complaint and the conduct has occurred after 1 January 2020.”

AFCA considers complaints about firms who provide financial advisory services and products to consumers. This includes assessing whether the conduct of individual financial advisers employed by these firms meets legal, industry and professional standards. Dr Smith said the Code attempts to improve adviser conduct and ensure they place their clients’ interests first and that they act in a way that is consistent with the values and standards expected of a member of a profession. 

AFCA will assess adviser conduct by giving the Code its practical meaning, taking into account:

1. the intention and objectives of the Code as a whole and the professional standards framework from which it is derived;
2. the current legislative, regulatory and professional environment within which the Code operates;
3. the Financial Adviser Standards and Ethics Authority’s (FASEA) guidance on the operation of the Code’s values and standards and;
4. the Australian Securities and Investments Commission’s expectations about steps Australian financial services licensees should take to ensure their advisers comply with the Code and specifically the guidance that they will take a facilitated compliance approach with respect to Standards 3 and 7 while FASEA continues to refine its guidance over the period up to the establishment of the single disciplinary body.

FPA CEO Dante De Gori, who hosted Dr Smith at the recent FPA 2019 Professional Congress welcomed the announcement saying, “Dr Smith has made it clear that AFCA will take a measured and considered approach to interpreting the Code of Ethics’. De Gori believed that this announcement, along with ASIC’s confirmation on its “facilitated compliance approach” to Code Standards 3 and 7, “…provides the much needed breathing space for financial planners to calmly work through the remaining areas of uncertainty with FASEA over 2020.”

Adviser Gloom Towards FASEA
Meanwhile, an industry survey conducted by Money Management has shown a massive lack of confidence in FASEA. Adviser sentiment toward FASEA in the survey was a lay down misere - asked the direct question, “Do you have confidence in the Financial Adviser Standards and Ethics Authority”, 97% of the 138 respondents answered “no”. Asked why this was the case, advisers overwhelmingly were critical of the FASEA board with suggestions that it was conflicted, had not listened to industry feedback, lacked industry experience and was short on common sense. There appears to be a high level of adviser concern – particularly at the level of influence exercised by the consumer representatives on the FASEA board.

Although two thirds of the respondents said they supported the objectives of the FASEA regime, a number of respondents said that it appeared some members of the FASEA board were pursuing a political agenda and, as such, were not practicing what they preached in terms of meeting ethical standards.

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