The Association of Financial Advisers (AFA) says it is strongly considering the creation of a two-part code of conduct, only half of which would require approval by the Australian Securities and Investments Commission (ASIC).
AFA CEO, Brad Fox, told advisers attending the Association’s GenXt National Roadshow this month that there was a possibility the AFA would adopt a split approach to its code of conduct. The first part of the code would apply to all members of the Association, based on core principles to guide professional behaviours. Members could then elect to belong to part two of the code, which would exist primarily to obviate the need for opt-in.
Some of you will be risk specialists – opt-in doesn’t apply – so giving that to you in a code gives you obligations you may not have wanted
Speaking at the Sydney Roadshow, Mr Fox said the two-part approach gave advisers choice and flexibility.
“Some of you will be risk specialists – opt-in doesn’t apply – so giving that to you in a code gives you obligations you may not have wanted,” he said.
He added that a two-part approach would also mitigate any issues arising from a repeal of the opt-in arrangement, should the Coalition regain power at the next Federal Election.
At the time the code of conduct amendment was first announced by the Minister for Financial Services and Superannuation, Bill Shorten, the then AFA CEO, Richard Klipin, said he was sceptical about the merits of what he termed an ‘ambiguous deal’.
Mr Fox echoed these concerns, saying: “Designing a code to circumvent elements of the law is at odds with the intended purpose of professional codes – which are typically about how to apply the law to give the right client outcomes.”
“Our position on codes and in particular professionalism is that it is achieved through education, compliance to the law and most importantly, the behaviour of advisers. Compliance to the law is the minimum standard, and it is a high standard following the FoFA changes. We do also encourage our members towards continual improvement and further personal professional development. It’s the carrot rather than the stick approach,” he explained.
Mr Fox said that the AFA had already broached the idea of the two-part code with ASIC Commissioner Peter Kell.
“He (Mr Kell) told us he thought the concept had merit and that ASIC was prepared to continue to work with us to develop it,” Mr Fox told riskinfo. However, he pointed out that the AFA had not settled firmly on the idea, and that the Association would not be rushed in its decision, noting that the first opt-in obligation would not occur until July 2015.
“This marks a different approach to client engagement. There are significant implications that flow from this approach and the industry needs to take the time to get it right.”
ASIC is due to issue its updated guidance on codes of conduct by the end of February.
Every time I read about this opt in or opt out business I just laugh. Clients have always had and always will have opt in and opt out choice, this government interference just makes life harder for all advisers. It’s totally unecessary but try telling them that.
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