Speaking at a Stockbrokers and Financial Advisers Association event, Shadow Minister for Financial Services and Superannuation Stephen Jones told the audience he believed it was time for a parliamentary inquiry into FASEA and the Government’s handling thereof.
The Labor MP said that while Labor “has always supported professional standards in the financial services industry,” FASEA failed to achieve that goal.
He added: “The Government’s inflexibility in setting professional standards – in their failure to set up FASEA appropriately and to recognise your industry’s qualifications and experience – has been enormously damaging to the industry.”
This isn’t the first time Jones has criticised the Government’s approach to professional standards for advisers. Last year, he said that FASEA had been “monumentally mishandled” and “built wrong from the ground up,” arguing that “when a regulator issues key standards mere days before they are to come into effect, you know that they are not doing their job right.”
At the time, his comments were part of a chorus of voices calling for major change at FASEA – and as we know, the Government announced that the education standards body would be wound up and absorbed into Treasury and ASIC not long after that. It wasn’t until April that we were given a clearer view on what the post-FASEA agenda will be – and currently, it looks like not much will be changing.
Based on Jones’ comments, he supports the view of many advisers in our community that simply duplicating FASEA’s standards within Treasury isn’t enough to address the flaws in the current framework.
One of the most common issues advisers have had since the FASEA’s introduction – beyond education pathways – is the Code of Ethics. As we’ve discussed numerous times, practical applications of the Code are one of the most consistent areas of underperformance for advisers sitting the FASEA exam; the standards body has attempted to rectify this through new guidance on multiple occasions, but in some cases this has only compounded the problem.
The current line from Treasury is that there are no plans to alter or replace the Code once FASEA’s standards-setting functions have been absorbed – but the idea hasn’t been ruled out completely. Should the inquiry Jones recommended go ahead, there may be room to reassess what an ethical standard for advisers could look like in practice.
Of course, there’s also the fundamental issue of purpose: what is the Code of Ethics designed to actually do? Are ethics something that can be mandated by legislative instrument?
Based on The Ethics Centre head Cris Parker’s comments in the latest season of Future Talk, this is one of the limitations of the FASEA framework. She said that one of the key differences between the FASEA Code and the Banking and Finance Oath (an Ethics Centre initiative) is that “FASEA has legalised ethics by putting it into a legal framework.”
“I still see a place for a voluntary oath by advisers,” she added, “because to be regulated to be ethical can be a little bit risky. Regulation falls into a compliance space, which means it falls into unthinking practices and creates a sense of security that you’re doing the right thing and you’re ethical because you’re obeying the law. Look where that got us.”
Parker said that she was regularly inspired by the passion advisers have for helping their clients – something that inherently can’t be dictated by the letter of the law.
Because of this, it’s worth asking: if there is the possibility of the FASEA Code being changed at some point, what should its function be? And who benefits from its inclusion in the legislative framework for adviser professional standards?
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