As AFA general manager - policy and professionalism Phil Anderson noted back in June, FASEA has the ability to amend its standards right up until the end of 2021. And now it appears that's exactly what's happening.
Having collected feedback from a "range of stakeholders" since the issue of its guide to the Code of Ethics in October last year, FASEA is now consulting on potential changes to Standard 3. This is possibly the most contentious part of the Code given that it prohibits advisers from "advising, referring or acting any other manner" where a conflict of interest is present. And depending on one's definition of a "conflict of interest", this wording could invalidate a significant amount of advice given in Australia.
FASEA CEO Stephen Glenfield explained that some stakeholders have "raised concerns" regarding Standard 3 and welcomed feedback on the three potential revisions FASEA has proposed in a new consultation paper.
The first option aims to capture FASEA's original intent behind Standard 3, which was to ensure advisers did not "advise, refer or act in any other manner" where a conflict of interest or duty is present that is "contrary to the client's best interests."
In this case, the revised wording would be: "You must only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest."
The second option is designed to reflect the recommendation by Commissioner Hayne that conflicts of interest or duty should be removed where possible. The wording for this option is: "You must not receive any benefit (whether monetary or non-monetary), nor enter into any relationship, that could reasonably be expected to influence the advice you give or the service you provide to your client."
Finally, the third option is to retain the wording of Standard 3 as-is.
Earlier this year, Glenfield told a Senate Estimates Committee hearing that FASEA had received multiple suggestions regarding possible amendments to Standard 3. One of the suggestions he cited was to revert back to FASEA's own wording in the draft version of the Code consulted on in November 2018, which prohibited providing advice "if [an adviser] would derive inappropriate personal advantage from doing so."
In the new consultation paper, FASEA said it rejected this option because the original wording "fails to give effect to this clear intent. Furthermore, it remains open to the original criticism, made in 2018, that it will lead to difficulty in interpretation given the inherent ambiguity in its wording."
The "ambiguity" FASEA refers to here seems to stem from what might broadly constitute "inappropriate personal advantage," even though the fluid definition of a "conflict of interest" - which, if you want to get philosophical, could exist in some form regardless of how closely an adviser hews to the Code of Ethics - appears to have caused much more confusion for the industry over the past few years.
The question, then, is whether either of FASEA's proposed revisions to Standard 3 (not including the option to retain the current wording) resolve these ambiguities. Are you satisfied with one or the other, or is there more work to be done?
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