Code of Ethics – FASEA releases updated draft guidance
Since the Code of Ethics was first legislated, FASEA have provided various guidance documents for Advisers and Licensees, with each iteration being informed and developed with consultation from a wide range of stakeholders.
On 5th October, a draft updated guide was released for consultation, which can be found here:
https://www.fasea.gov.au/wp-content/uploads/2020/10/Financial-Planners-and-Advisers-Code-of-Ethics-2020-Guide.pdf
The draft guide builds on the Preliminary Response to Submissions released in December 2019 and the case study examples contained in FG002 Financial Planners & Advisers Code of Ethics 2019 Guidance.
Given all Advisers are subject to the Code, we strongly recommend you read and consider the FASEA guidance contained within the draft guide. In light of questions you’ve raised with us over the last 12-18 months, we note 2 areas within the draft guide:
Assessing Conflicts of Interest (Standard 3)
The guidance continues to confirm insurance commissions and asset-based fees (among other types of remuneration) are not conflicted simply because they are percentage based. However, the obligation rests with you to ensure you are acting in the clients’ best interests, and the cost to the client is fair and reasonable.
In addition, the draft guidance refers to the recently separated/divorced couple example, clarifying that an Adviser needs to use their professional judgement to determine if they can act for both parties, and still meet their obligations under the Code.
Broader long-term interests (Standard 6)
Previous guidance caused some concern that it was not acceptable under the Code to provide limited scope advice. FASEA’s draft guide confirms the scope of advice can be limited; however, you must assess (and document) whether the limited scope is in the best interests of the client.
The guidance states:
It is important you consider the longer-term requirements for the client appropriate to the scope of the advice provided. You are not expected to complete a holistic risk assessment or fact find for limited scope advice but would be expected to conduct sufficient information gathering to be satisfied the advice is in the client’s best interests as it relates to that scope.
For example, if a client came to you seeking advice to establish a SMSF, you need to gather sufficient information to determine if a SMSF will be an appropriate vehicle for them to meet their retirement objectives, and whether they have the time, capability and capacity to fulfil their duties as trustee/director of corporate trustee, in addition to the recommendations regarding the SMSF, investment strategy, and investments.
Go to our Upcoming Events & Webinars’ section to register for our weekly discussion group on the Code of Ethics
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Code of Ethics – FASEA releases updated draft guidance
Since the Code of Ethics was first legislated, FASEA have provided various guidance documents for Advisers and Licensees, with each iteration being informed and developed with consultation from a wide range of stakeholders.
On 5th October, a draft updated guide was released for consultation, which can be found here:
https://www.fasea.gov.au/wp-content/uploads/2020/10/Financial-Planners-and-Advisers-Code-of-Ethics-2020-Guide.pdf
The draft guide builds on the Preliminary Response to Submissions released in December 2019 and the case study examples contained in FG002 Financial Planners & Advisers Code of Ethics 2019 Guidance.
Given all Advisers are subject to the Code, we strongly recommend you read and consider the FASEA guidance contained within the draft guide. In light of questions you’ve raised with us over the last 12-18 months, we note 2 areas within the draft guide:
Assessing Conflicts of Interest (Standard 3)
The guidance continues to confirm insurance commissions and asset-based fees (among other types of remuneration) are not conflicted simply because they are percentage based. However, the obligation rests with you to ensure you are acting in the clients’ best interests, and the cost to the client is fair and reasonable.
In addition, the draft guidance refers to the recently separated/divorced couple example, clarifying that an Adviser needs to use their professional judgement to determine if they can act for both parties, and still meet their obligations under the Code.
Broader long-term interests (Standard 6)
Previous guidance caused some concern that it was not acceptable under the Code to provide limited scope advice. FASEA’s draft guide confirms the scope of advice can be limited; however, you must assess (and document) whether the limited scope is in the best interests of the client.
The guidance states:
It is important you consider the longer-term requirements for the client appropriate to the scope of the advice provided. You are not expected to complete a holistic risk assessment or fact find for limited scope advice but would be expected to conduct sufficient information gathering to be satisfied the advice is in the client’s best interests as it relates to that scope.
For example, if a client came to you seeking advice to establish a SMSF, you need to gather sufficient information to determine if a SMSF will be an appropriate vehicle for them to meet their retirement objectives, and whether they have the time, capability and capacity to fulfil their duties as trustee/director of corporate trustee, in addition to the recommendations regarding the SMSF, investment strategy, and investments.
Go to our Upcoming Events & Webinars’ section to register for our weekly discussion group on the Code of Ethics