{"id":46867,"date":"2019-10-22T16:33:54","date_gmt":"2019-10-22T06:33:54","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=46867"},"modified":"2019-10-23T05:51:32","modified_gmt":"2019-10-22T19:51:32","slug":"afa-slams-fasea-code-of-ethics-guidance-on-conflicts-of-interest","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2019\/10\/22\/afa-slams-fasea-code-of-ethics-guidance-on-conflicts-of-interest\/","title":{"rendered":"AFA Slams FASEA Code of Ethics Guidance on Conflicts of Interest"},"content":{"rendered":"

The Association of Financial Advisers has delivered a stinging assessment of FASEA’s approach to dealing with conflicts of interest as outlined within its Code of Ethics guidance notes<\/a> released at the end of last week.<\/p>\n

\"\"<\/a><\/span>The key issue for the AFA revolves around the third of FASEA’s three ethical behaviour standards, which states:<\/p>\n

“You must not advise, refer or act in any other manner where you have a conflict of interest or duty.”<\/span><\/em><\/p>\n

The Authority’s accompanying guidance around this standard includes a notation that:<\/p>\n

“…the primary ethical duty in this Standard is that, if you have a conflict of interest or duty, you must disclose the conflict to the client, and you must not act. If the client wishes, you may refer the client to another relevant provider if neither you nor your principal will receive any benefits from the referral.”<\/em><\/p>\n

In a message to members this week, AFA CEO, Phil Kewin<\/strong>, set out the rationale for the Association’s highly-critical response to the guidance notes:<\/p>\n

“The AFA has been outspoken in our criticism of the FASEA Code of Ethics, particularly with respect to Standard 3, which was altered from the original November 2018 Code draft to now read\u00a0 \u201cYou must not advise, refer or act in any other manner where you have a conflict of interest or duty\u201d. In our view, and the view of most others outside of FASEA, this is simply impractical. In two subsequent consultations with FASEA we were assured that we should not interpret this standard too literally and the Guidance would be issued to allay our concerns.”<\/p>\n

Kewin said the release of FASEA’s guidance notes at the end of last week only served to increase its concerns when the Authority stated:<\/p>\n

\u201cThe making of the Code and changes to education and training standards, reflect community expectations that the provision of professional advice be centred on serving the best interests of the client free from any conflict.<\/em>\u201d<\/p>\n

This is tantamount to FASEA creating its own laws…<\/h6>\n

Kewin’s response: “This is tantamount to FASEA creating its own laws, way above the current law. We simply do not understand how it is possible, when the Corporations Act only requires conflicts to be managed, and the law specifically permits life insurance commissions and other conflicted arrangements, that FASEA could issue a Code of Ethics, that is binding on all financial advisers that appears to completely ban conflicts of interest.”<\/p>\n

Kewin maintains that any expectation to totally remove conflicts of interest is simply impractical: “FASEA clearly do not understand the extent of conflicts in financial services, the impact that their removal would have, or appreciate how conflicts are managed to ensure that advice is provided that is in the best interest of the client,” he warned.<\/p>\n

…any expectation to totally remove conflicts of interest is simply impractical<\/h6>\n

While conflicts of interest have been identified as a key area of focus, particularly since last year’s Banking Royal Commission, Kewin pointed out to his members that professional and personal conflicts of interest will arise in many different ways in all walks of life: “…however the key is how you effectively manage those conflicts whilst continuing to act in the best interests of your clients.”<\/p>\n

The Association says that in the lead-up to the formal implementation of the FASEA Code of Ethics from 1 January 2020, it will be advocating for change and to ensure greater clarity, including:<\/p>\n