Financial Planners and Advisers Code of Ethics 2019 Guidance

Financial Planners and advisers Code of Ethics 2019 Guidance

On 8 February 2019, FASEA made the Financial Planners and Advisers Code of Ethics by Legslative Instrument (the Code).

The Code brings together expectations of the Australian community for the provision of professional financial advice.  It comprises five (5) values and twelve (12) standards.  Compliance with the Code is effective 1 Janauary 2020.

FASEA provides guidance to promote clarity on the integrated nature of the Code and the practical elements.

The guidance is primarily provided for Financial Advisers and Provisional Financial Advisers to help them understand their ethical obligations established in the Code as a relevant provider.  The guidance will also help Supervisors of those undertaking their Professional Year.

The guidance will serve as a point of reference for:

  • Financial Services Licensees as they assist their Financial Advisers and Provisional Financial Advisers are complying with the Code;
  • Consumers seeking to understand the ethical obligations of advisers;
  • Educators involved in designing and delivering Ethics for Professional Advisers courses; and
  • Regulators.

FASEA will continue to consult and engage with stakeholders in the lead up to the implementation of the Single Disciplinary Body to promote a consistent implementation of the Code.

 

FG002 Financial Planners and Advisers Code of Ethics 2019 Guidance

Preliminary Response to Submissions

Frequently Asked Questions

As a Licensee, what measures do I need to take to ensure my advisers are complying with the Code of Ethics from 1 January 2020?

Refer to ASIC’s communication on the 26 November 2019 (link), detailing ASIC’s expectations of Licensees in ensuring their advisers are complying with the Code of Ethics from 1 January 2020.  This approach will allow time required for any business model changes.

As a Financial Adviser, what evidence will I need to provide ASIC to ensure I’m not breaching the Code?

FASEA encourages you to consult with your Licensee regarding record keeping aligned with meeting the requirements of the Code.

As an Adviser specialising in Insurance advice, I receive commissions for the advice I provide my clients. Is this conflicted and will I breach the Code of Ethics?

Insurance commissions are explicitly allowed by law and may be an acceptable form of remuneration for advice.  In the context of a specific client situation, an adviser before acting for the client would need to satisfy themselves that they do not have an actual conflict by for example demonstrating the following:

  • The advice and product recommendation is in the best interests of the client;
  • The commission received is fair and reasonable and represents value for the client and is fully understood by the client;
  • The client understands benefits, costs and risks of the Insurance advice;
  • The advice and fee structure are appropriate for the client; and
  • A disinterested or unbiased person, in possession of all the facts, would reasonably conclude that the remuneration would not lead the adviser to prefer the interests of someone (including their own) over the client’s best interest.
As an Adviser specialising in stockbroking, I receive brokerage fees for the advice I provide my clients. Is this conflicted and will I breach the Code of Ethics?

Brokerage fees are generally an allowable form of remuneration for advice on shares.  In the context of a specific client situation, an adviser before acting for the client would need to satisfy themselves that they do not have an actual conflict by for example demonstrating the following:

  • The advice and product recommendation is in the best interests of the client;
  • The brokerage fee is fair and reasonable and represents value for the client and is fully understood by the client;
  • The client understands benefits, costs and risks of the share advice;
  • The advice and fee structure are appropriate for the client; and
  • A disinterested or unbiased person, in possession of all the facts, would reasonably conclude that the remuneration would not lead the adviser to prefer the interests of someone (including their own) over the client’s best interest.
As an Adviser I have a referral arrangement with a Mortgage Broker. I refer my financial advice clients to the mortgage broker when my clients need help with their mortgage or any new loans. In return the Mortgage Broker gives me a $500 payment from the commission he receives for the loan/mortgage. Given this is not a financial product that is affected by the Code can I still receive this fee?

Referral fees received from a third party directly to the Adviser will breach the Code of Ethics.

As a Licensee or a Corporate Authorised Representative (CAR), I have contractual referral arrangements with third parties which will be difficult to change before 1 January 2020. Will my advisers breach the Code until these arrangements have been changed?

Licensee arrangements fall outside the Code and will not be required to change as they are not subject to the Code provisions.  However, if the structure of these referral arrangements negatively impacts on the ability of relevant providers to meet their obligatons under the Code, FASEA would expect that they be reviewed and amended.

Where the Adviser’s remuneration is related to the referral fee received via the Licensee structure or CAR and is paid dirctly to the adviser, the adviser will need to demonstrate compliance with the Code in the same manner as any other form of remuneration received.

As an Adviser, I have over the course of 2018 contacted my existing clients as the renewal of their Ongoing Service agreement was required. Do I need to re-contact these clients after 1 January 2020 to seek their consent again?

An adviser who has recently received consent from the existing client for the service and fees they will be paying, does not need to re-contact the client to receive consent post 1 January 2020.  The next renewal period is sufficient.

As an Adviser, I have existing clients who I do not regularly contact where I continue to receive commission. These clients are grandfathered pre the FOFA requirements. Do I need to contact them after 1 January 2020 to seek their consent?

An adviser will need to contact these clients as soon as practicable, to seek their consent post 1 January 2020.  Depending on the number of clients that meet this requirement, the adviser is expected to develop a plan that is practicable during 2020.

What format is required when obtaining consent from my clients?

An adviser will need to ensure they receive signed consent from their clients. This may be using existing forms e.g. Ongoing Service Agreement, Initial Service Agreement, Authority to proceed with Advice etc.  FASEA does not expect that a new form is created to meet this standard. 

Access the Financial Planners and Advisers Code of Ethics 2019