FASEA code does not prevent action

FASEA code of ethics

Advisers should not regard the FASEA Code of Ethics as restricting behaviour, but instead as providing a framework around the actions that need to be taken.

Financial advisers should not regard the Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics as restricting their ability to act, but rather giving them a framework to question how they should act in situations where there may be a conflict of interest.

Speaking at the SMSF Association Technical Day 2020 today on standard three of the code, which relates to conflicts of interest, BT head of financial literacy and advocacy Bryan Ashenden said where an adviser may be faced with a conflict, they should question if their advice would change if there was no conflict.

“If we acknowledge we have got existing conflicts, but we weren’t offering those services, would the advice be the same? That is the threshold, that is the test,” Ashenden said.

“That also helps prove it from a best interest perspective because you can say: ‘I would have given the same advice … irrespective of who provides the other services, and I would have said the same thing.’

“That will get you past the code and while the conflict exists, it did not influence advice, and that is what FASEA has really focused on – did the conflict influence your advice? If it does, that is when FASEA says don’t act.”

He also pointed out advisers should not consider they are unable to act in most circumstances where there is a conflict, but needed to question their approach.

“Don’t think you can’t act. The guidance from FASEA refers to actual conflicts, not potential or perceived, and if those conflicts did not exist, would the advice be the same? If you say no, then that is where you have a question mark that needs to be addressed and should you be proceeding because of your ethical obligations,” he said.

He noted advisers could also consider a third-party view and how they would consider any advice provided in assessing whether there is a conflict.

“If you take an outside view and look at it, start with a disinterested person who has all the facts. What would they think about it? Would they think you are acting in a way that is not consistent with the best interest of the client?” he said.

“Are you doing this for every client, because then it starts to look like a deliberate process, but if it is not something you are doing for every client, then there may be some other justifications in place.”

Advisers have also been urged to consider the entire code of ethics when making decisions, particularly when considering the application of standard 3.

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