The AFA’s submission to FASEA in response to its latest Code of Ethics Guidance has continued to highlight a number of issues with the practicality of the code and “…ongoing confusion and uncertainty about the implications for financial advice businesses”.
A statement from the association explains that the latest guide from FASEA follows earlier documents released in October 2019 and December 2019 and that it is intended to provide additional information on the intent of each standard and how to apply the standard.
The AFA says that in addition to its previously stated concerns about the “unworkable nature” of Standard 3, which seeks to ban all conflicts of interest and duty, and the lack of clarity with respect to the requirements under Standard 7, which relates to remuneration, “ …we have also raised substantial concerns about the guidance on Standard 4 and the expectation to obtain consent from existing clients”. (Also see: Call For More Clarity on FASEA Code Update.)
“This has caused substantial confusion and anxiety, particularly amongst risk advisers, based upon the potential requirement to obtain consent for all existing clients. We have strongly challenged the premise of what FASEA has proposed,” AFA states.
In support of its submission, AFA says it has also included a letter that it prepared in October 2019, along with the FPA, as part of its joint task-force on life insurance.
…setting out the reasons why life insurance business cannot be treated the same as investment and superannuation business…
“In this joint letter, we called on FASEA to treat this consent from existing clients requirement differently for life insurance clients, setting out the reasons why life insurance business cannot be treated the same as investment and superannuation business.”
AFA says that it is aware that this latest guide from FASEA, and in particular the commentary around Standard 4, “…has caused a great deal of concern for many advisers. At this stage it is a draft and of course the ASIC facilitative compliance approach remains in place for Standards 3 and 7”.
“We, like all financial advice sector participants, want this to work, however, we will continue to argue passionately against measures that threaten financial advice businesses, while at the same time providing no client benefit,” the association’s statement says.
Click here to read the AFA submission.
Does FASEA Code of Ethics signal defeat on accessibility of personal financial advice?
Meanwhile The Advisers Association says that while the draft FASEA Code of Ethics is another step forward in the professionalisation of financial advice, the association believes the scope is too narrow, too constraining and at odds with its broader intent.
A statement from the association says that given that the broader intent of the code is to meet the expectations of ‘the Australian community’ for the provision of professional financial advice, “…the focus within it on financial advice clients is too narrow and should be extended to include people who are not clients,” says TAA CEO, Neil Macdonald.
He says TAA questions whether the narrow focus is supporting a view that quality personal financial advice will only be available to a privileged few.
“Is the focus on clients supporting a view that only intrafund or roboadvice should be available to everyday Australians, or is it an acceptance of defeat that professional advice is out of reach and not available to everyday Australians? Either way a narrow scope limits the utility and timeframe for this draft.”
Macdonald says broadening the scope to include more Australians would make it clearer to the financial advice community that being in a profession requires looking beyond their own clients.
He says it would also better align with the focus of key stakeholders, including advisers, Parliamentarians and regulators, “…which is on meeting the unmet advice needs of everyday Australians and ensuring that quality personal advice is accessible, viable and cost-effective wherever and whenever it is required by all Australians”.
That said, he says, that in the current environment, the scope of the code cannot be broadened to include all Australians.
“It is an impossible task to meet the expectations of all Australians, especially when considering recent survey results that indicate consumers want to pay no more than $500 for advice,” he says.
He says this is not feasible in the current regulatory and licensee environment. “In broadening the scope to include the expectations of the Australian community, we therefore need to be very clear who ‘the Australian community’ actually is.”
Click here to read The Advisers Association’s submission to FASEA.
