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 Criticism
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!
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"My concern is standard 12. Recently had presentation by compliance team at licensee and they are changing the way they do the annual audit. They have 36 standards they will assess against for the audit and each of these standards have a weighting. Some of these standards are directly related to code of ethics standard and have a high weighting (as expected). The licensee rating system allows you to have one mark against a highly weighted rating but still be marked as the second highest advice quality rating (out of five levels). However, standard 12 suggests that the licensee should report the adviser to the monitoring body. You can therefore have a high audit rating but still have to be reported as failing to comply with the Code of Ethics. Does anyone else recognise this as an issue?"
Andrew Perkins 11:07 on 16 Nov 19
"Hey "realist" Clearly you have a gripe with the FPA. Fair enough, a lot of advisers do. Saying that FASEA "will make the Financial Planning Industry more professional in the eyes of the public" is utter nonsense. The general public don't have a clue who FASEA is or what they are there for. I have been advising people on risk insurance for the last 33 years. Never had a complaint, never failed an audit. I am professional in every aspect in the eyes of all of my clients, especially when I am there for them in times of need. I don't need a university degree to make me look more professional. There will always be bad eggs in our business, this ridiculous regime won't change that one iota. It will just make them look a bit smarter. "
Deputy 16:48 on 15 Nov 19
"https://www.legislation.gov.au/Details/C2018C00424/Html/Volume_4#_Toc528570740 Division 8C—The standards body Subdivision A—Functions of the standards body 921U Functions of the standards body (6) Before making a legislative instrument under subsection (2), (3) or (5), or when reviewing a legislative instrument under paragraph (1)(b), the standards body must consult: (a) financial services licensees; and (b) relevant providers; and (c) associations representing consumers of financial services; and (d) professional associations; and (e) ASIC and the Department; and (f) any other person or body that the standards body considers it appropriate to consult."
jd 16:33 on 15 Nov 19
"Did anyone ask Stephen to state the 5 values or did he‘take it on notice’?"
Not surprised 15:47 on 15 Nov 19
"I said this earlier today on another industry website forum - how this organisation can be allowed to hold this industry to ransom and cause so much upheaval and disruption when there's so much about it that just stinks to high heaven? It just beggars belief that it can happen - let alone in Australia and more so with a Government that used to stand for free enterprise. Let's tell it as it is... 1) It's very funding comes from 8 banks / institutions. You can't tell me there's no intended consequences to IFA's and SME advice businesses with their agenda. 2) Numerous Board Members have financial arrangements with education bodies that are providing the very further education advisers are being forced to unfairly undertake - with very little acknowledgement of prior learning or experience taken on board so they maximise their financial gain from this further education; 3) There's very clearly been a deliberate ploy NOT to involve advisers or industry bodies in the code of ethics process because logic and common sense would dictate they amend them (or abolish them altogether). This organisation seems hell bent on destroying SME and IFA advisers by preventing us from earning an honest income from the work we do so that when the industry is in a catastrophic state and there's no advisers left to look after consumers, laws will no doubt change that open the flood gates for the banks and institutions to clean up in the billions. This has to stop....its just so wrong what FASEA are proposing. "
How Can This Happen In Australia? 15:36 on 15 Nov 19
"I think the best part of FASEA is that it will ultimately lead to the extinction of the FPA. The FPA is basically irrelevant to the industry now. Educational requirements are finally in the hands of the people who should have always controlled education. The CFP which has always been held up as the greatest thing since sliced bread has been shown to be worthless. The FPA now has no purpose in continuing to exist. FASEA will make the Financial planning industry far more professional in the eyes of the public. The FPA was never able to achieve this. "
Realist 15:27 on 15 Nov 19
"Can someone please get Mr Glenfield to explain the difference between a) an actual conflict, b) a potential conflict, and c) a perceived conflict? Sounds to me like this is key, so he should be able to do this easily I'd imagine."
DK 15:26 on 15 Nov 19
"FASEA paymasters are the FSC & banks. This has been the game plan the whole time, wipe out IFA's "
Mark 15:26 on 15 Nov 19
"The fact that Advisers, who are the meat in the sandwich, were not invited or asked for input is not surprising. The danger of having Advisers giving input, is that they may actually tell FASEA what FASEA does not want to hear. Virtually every aspect of FASEA's approach and requirements for Life Insurance specialists has been flawed. FASEA themselves are a conflicted organisation and would fail any independence or BID test. FASEA are causing mayhem and their supposed improvements, will cause millions of Australians to be without proper representation, or for that matter, ANY representation. Finally the Industry associations are realising that their polite discourse has fallen on deaf ears and that they need to take FASEA head on with no backing down or backing off. The Retail Life Insurance Industry will collapse unless FASEA is removed, replaced or at least told to wind their necks in and start creating a positive environment for the future advice community and for all Australians."
Jeremy Wright 15:23 on 15 Nov 19
"Doctors would fall foul of FASEA's code of ethics. If my doctor prescribes me a drug and accepts paid travel to a conference from the drug maker, he's contravened FASEAs code. Every time a doctor prescribes a drug there's a conflict of interest. "Pharmaceutical companies gave Australian doctors, nurses and pharmacists almost $12m in fees and expenses to attend conferences and give talks between November 2016 and April 2017. " Source: Guardian.com 12 Sep 2017"
Steve 15:16 on 15 Nov 19
"Stephen Glenfield has replied "the guidance around the code was subject to change but the code itself is not". However, Part 1 of the FG002 Code of Ethics 2019 Guidance document clearly states: " The Code is a living document SUBJECT TO CHANGE". It is therefore now necessary to immediately alter Standard 3 within the code so it is not discriminatory, unfair, attempting to rewrite the law and unworkable."
Craig Yates 15:10 on 15 Nov 19
"Jan 1 is barely 6 weeks away and that the interpretations are still getting ironed out is a testament to the ability of the government and the industry to act and not kick the can down the road for years."
S. Arcasm 15:07 on 15 Nov 19