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Piecemeal advice makes FASEA code compliance easier

Piecemeal advice FASEA code

An industry specialist has suggested providing financial advice in a piecemeal way to comply with the FASEA Code of Ethics.

Practitioners may need to break the SMSF advice they provide into piecemeal segments that are more easily digestible to better ensure compliance with standard five of the Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics, a sector specialist has said.

BT Financial Group head of financial literacy and advocacy Bryan Ashenden told delegates at the recent SMSF Association National Conference 2021 that standard five of the FASEA Code of Ethics consists of two parts and his suggestion is in reference to the second aspect.

“The first bit of standard five is almost your corporations law, it’s your best interest duty type of thing. So is the advice [and] the product recommendations that you’re giving to your clients – is that in their best interest?” Ashenden noted.

“But it’s the second bit of standard five that says you need to be comfortable that your client actually understands your advice.”

In this context, he recognised SMSF advice is complex and this could worry practitioners as to their ability to meet this prescribed standard.

“It doesn’t have to be [complex] though. You have to just think about what is the right way that we educate the client and perhaps it is the case of saying well let’s just take it piece by piece,” he noted.

“Let’s work our way through this process. Let’s just deal to this particular issue now, address that, and then we’ll come back to the next issue.”

He pointed out this approach could result in a greater administrative burden for advisers, but emphasised the outcome it could achieve.

“[This method] may mean we have to provide multiple statements of advice over an extended period of time, but does that give your client a better understanding? And if it gives your client a better understanding [of the advice you’ve provided], doesn’t that also help you?” he said.

“Because as standard five says, you need to have reasonable grounds to be satisfied that your client understood [the advice given and] if you can break it down, and take it into those chunks, then that actually might help you as an adviser.”

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