Soft dollar violators face public shaming

Advisers and dealer groups who flout the new industry code of practice on soft dollar payments may be publicly ‘outed’ by the Financial Planning Association (FPA).

The board of the FPA is considering a plan to make public the names of its members who do not comply with the code once it comes into force on January 1, next year.

The code, released jointly by the FPA and the Investment and Financial Services Association (IFSA) in July, bans some soft dollar payments that are linked to volume sales and requires others to be disclosed on a public register.

However, FPA board member Corinna Dieters says the association needs to confirm its legal position before pushing ahead with the plan.

“[On] the decisions around how we deal with members that don’t comply, certainly our board is very keen to be able to publish those, but we have to look into whether or not we can do that from a legal perspective,” she says.

The comments were made at a financial planning industry forum on soft dollar payments and conflicts of interests organised by Money Management (see page 16).

IFSA chief executive Richard Gilbert, who was also part of the forum, says his association will also take a tough stance against members who disregard the code.

“A condition of IFSA membership is that you comply with the IFSA standards and guidelines, and up to the extent that you don’t comply with that one, you won’t be a member,” he says.

But consumer advocate Khaldoun Hajaj, director of policy and research at the Financial Services Consumer Policy Centre, says industry associations have a history of not strictly policing their own codes of practice.

“I think without publication of names, without public shaming, then I think this code will be another very thorough code on paper and not particularly effective in reality,” he says.

Meanwhile, the FPA has released preliminary details of the next phase of its reform process for the industry — a new set of guidelines on conflicts of interest for financial planners, which are being developed to sit alongside the code on soft dollar payments.

The association told planning group heads at a conference in Sydney last week that the guidelines will be “principles based”, such as that clients’ interests should always be put first, as opposed to prescriptively banning certain practices that may lead to conflicts of interest for advisers.

FPA chief executive Kerrie Kelly told Money Management the guidelines, which are still in their infancy, would be strictly enforced.

“Members of the FPA, when they join the FPA, agree to be bound by the FPA’s principles and code of conduct and standards of professional behaviour, so that if there’s a breach and they are found to have not met the membership standards, they run the risk of no longer being asked to be an FPA member,” Kelly says.