Not long after Shadow Assistant Treasurer and the Shadow Minister for Financial Services Stephen Jones labelled FASEA as having been "built wrong from the ground up," three associations have submitted their criticisms of the Government's adviser education program.
The point of contention at the moment is the revised guide to the FASEA Code of Ethics, which already attracted significant concern across the industry a year ago. Despite FASEA’s attempts to further clarify the Code, it would appear based on industry response that there’s a lot more work to be done.
A submission by the Association of Financial Advisers, for example, argues that rather than clarifying matters, the new guide "presents additional and unnecessary complexity as FASEA's expectations on certain issues seems to have changed with the interpretation contingent on which document a financial adviser reads."
This sentiment is echoed in the Financial Planning Association’s submission, which notes that once finalised, “this document will be the second piece of guidance issued by FASEA for the Code of Ethics.”
The submission continues: “It is important that new guidance is consolidated into a single document to ensure that financial planners have a single source that covers all official guidance issued by FASEA. The FPA recommends that FASEA incorporates any new guidance into a single document, with clear version control for ease of reference.”
This lack of conciseness and clarity presents a practical problem for those subject to the Code, as per another submission by the Stockbrokers and Financial Advisers Association. The SAFAA statement acknowledges that FASEA has “frequently expressed its views on the intent of the Code” - referring here to both the original and revised guidance - “but the challenge is that it will not be FASEA that interprets compliance with the Code.”
What the SAFAA statement refers to here is that penalties for breaches associated with the Code will be meted out by ASIC, AFCA and the courts, all three of which will be able to assess compliance "with the benefit of hindsight."
"The courts are already giving extended meaning to the enforcement of the obligations in the Corporations Act to adequately manage conflicts of interest and acting efficiently, fairly and honestly," the submission continues, "and they are likely to give extended meaning to the obligations under the standards in the Code of Ethics."
There are numerous other and more specific complaints about the standards in the Code as it currently stands – including case studies about the perennial problem of clients not understanding the advice given to them, a subject discussed in the latest season of Secrets of the Money Masters. But the overall sentiment appears to be that FASEA cannot fix the current situation through additional guidance documents.
As the AFA submission concludes: “FASEA will need to change their approach and engage with the financial advice profession in a deliberate, structured and comprehensive way to address the significant number of outstanding issues. The profession needs to be part of building the solution, not simply the recipients of updated guidance that is released from time to time.”
With aspects of FASEA now being challenged across the industry – not to mention in Parliament – it will be interesting to see how the standards body responds in the coming weeks.
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