FPA tells FASEA: Stop playing 'semantic games'
The Financial Planning Association (FPA) has warned the Financial Adviser Standards and Ethics Authority (FASEA) against playing “semantic games” with respect to remuneration within Standard 3 of the financial adviser code of ethics.
Responding to FASEA’s recent release of updated and expanded guidance around the code, the FPA has made no bones about Standard 3 and the need for clarity around the appropriateness or otherwise of various forms of adviser remuneration.
“The effect of standard three on certain forms of remuneration has been highly debated and is a significant challenge for the financial planning profession. FASEA has stated that it does not prohibit any specific form of remuneration. Yet the new guidance document also states, “certain forms of remuneration will always fail to meet the requirements of the code of ethics,” the FPA submission said.
“The FPA strong view is that FASEA should not play semantic games with this topic and should be clear on what it considers the effect of standard three is on common forms of remuneration,” it said.
“By failing to address this issue properly, FASEA is encouraging confusion and inconsistent application of the code of ethics, which is not in the interests of the profession or Australian consumers.”
“FASEA does not need to be definitive in considering forms of remuneration, nor does it remove the onus from financial planners to apply the principles of standard three to their remuneration. However, some clear guidance on common forms of remuneration would promote a consistent understanding throughout the profession,” the FPA submission said.
In a broad statement attached to the release of the FPA submission, the organisation’s chief executive, Dante De Gori, said FASEA’s release of draft guidance was a positive step but that there was more work to be done.
“The challenge for FASEA in establishing a new professional code is building a strong and consistent understanding of the practical application of the code’s principles in the broader profession to ensure that it is effective at setting standards and driving behavioural change. Confusion and inconsistent application of the principles will undermine confidence in the code of ethics and hamper its effectiveness as a reform,” he said.
The Institute of Managed Account Professionals (IMAP) has been similarly critical of the FASEA approach to Standard 3 using its submission to state: “we believe that the guidance under Standard 3 is still misleading and confusing, in particular due to the way the disinterested person test is described on page 18.
“We believe that this wording undoes much of the clarity provided by the preceding paragraphs. It should be changed to be more in line with the intention of Standard 3 - being that where a conflict cannot be appropriately managed (as outlined above), it must be avoided. Conflicts are generally assessed as “potential”, “perceived” or “actual”. In this and previous guidance, FASEA has suggested that Standard 3 only applies when there is “actual” conflict”.
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