FOS says stick to code ‘lock, stock and barrel’

Financial planners who adhere to the Financial Planning Association of Australia’s code of professional conduct will never run into trouble with the Financial Ombudsman Service (FOS), according to Alison Maynard, the investments, life insurance and superannuation ombudsman.

Maynard told the FPA’s Beyond the Shadow Shopper roadshow in Melbourne on Wednesday, and again at the roadshow’s stopover in Perth yesterday, that about 55 per cent of cases that come before the FOS are settled in the applicant’s – that is, the client’s – favour.

Working to the FPA’s code of practice would not necessarily stop clients complaining about advice, Maynard said, but in Melbourne she told the roadshow that “if you follow the code lock, stock and barrel, you will never have a problem at FOS”.

FOS is mainly concerned with assessing whether advice provided to applicants is appropriate to their circumstances, that there is a reasonable basis for providing the advice, and that the advice is presented in clear and easily understood terms, according to Maynard.

She said FOS also often looks at documentation outside the statement of advice (SoA) for evidence that appropriate investigations have been made and information sought, and for evidence of more in-depth conversations and discussion between clients and advisers on issues that might be touched on in the SoA.

Guidance on codes of practice

Australian Securities and Investments Commission (ASIC) commissioner Peter Kell told the audience that the regulator was working closely with the industry on approving codes of practice. Approval of an association’s code could lead to its members being exempted from opt in, as it is framed under the Future of Financial Advice (FoFA) regulatory reforms.

He said ASIC will release guidance on “what we might expect in terms of key requirements for codes”.

While adhering to a particular code might “among other things, obviate the need for opt in… we hope there will be members of that code, as occurs with the FPA, for much broader reasons around professional standards and the way you deal with your clients and the expectations in that area,” Kell said

“There’s a little bit of hysteria around some of those issues at the moment. We think once people see what’s out there they’ll realise that ASIC will take a sensible approach. I’ve had people come up to me and say there are whispers that you’ll go well beyond the law. Well, it’s not within the scope of a regulator to do that. We now have a clear indication of where FoFA is going, and we’re looking forward to getting down to implementing it.”

Code consulting

“The codes issue is interesting. I think it’s a little less well understood, but ASIC has had a longstanding policy around what standards we look to when it comes to approving codes – what we expect to find, governance arrangements, arrangements about monitoring and enforcement, compliance with codes, the sorts of issues we expect to see in codes. And the FPA is, more than just about anyone else, quite familiar with those sorts of requirements and how they apply.

“We think it’s going to be a great opportunity overall to signal an increase in standards, to signal that conflicts of interest are going to be much more effectively dealt with, to signal it’s going to be around putting the best interests of the consumer first… and allowing people to take forward their practices along those lines.

“We’re very much open to listening to anyone about their issues or concerns as well.”

According to Kell, ASIC is also continuing its work on regulatory guidance for FoFA.

“We have already been undertaking a lot of consultation across the financial services sector generally – a lot with the FPA, for sure – and that has been very beneficial, and it’s been very pleasing to see the way firms across the sector have been gearing themselves up, and adapting their models where they need to do so, but in many cases looking at how what they currently do will actually reflect some of the requirements in FoFA; giving us lots of examples as to the sorts of practices and policies they have in place and how they can assure that they are FoFA-compliant,” he said.

“So there are a lot of those discussions going on already. Around the middle of the year – as close to July 1 as possible – we will be issuing guidance on the best-interests duty, on scaled advice and on conflicted remuneration. We’ll be issuing that guidance for consultation, in the first instance, and I think that will help to fill a vacuum that is allowing some of the slightly over-the-top commentary that we see in parts of the media at the moment.

“It will clarify some of ASIC’s views, but also allow us to test what the expectations are and what the practices are in the industry and how we can take them into account in how we administer the law. There will be a consultation process of around three months or so for that, with the aim to putting out final guidance on those sorts of issues around September/October.”