Designing a code to circumvent elements of the law is at odds with the intended purpose of professional codes – which are typically about how to optimally apply the law in the first place.

This is the Gordian knot the Association of Financial Advisers (AFA) believes the Future of Financial Advice (FoFA) Code of Conduct requirement has tangled the industry in.

AFA CEO Brad Fox says the association is looking for a more practical approach to the issue that addresses both the complexity and extended timeframe involved.

“The first opt-in obligation does not kick in until July 2015, so the industry has the time to get this right,” he said.

“Codes of conduct set expectations for behaviour and are critical in ensuring client outcomes. However, the opt-in exemption, which is about getting an exemption from the law, means they are morphing into something else.”

Cracking the code 

Fox says he accepts that Australia’s reworked financial planning laws, together with practical professional body codes of conduct, will ensure an appropriate behavioural framework for advisers, but argues that codes were never designed to be the law.

“Designing a code to circumvent elements of the law is at odds with the intended purpose of professional codes – which are typically about how to apply the law to give the right client outcomes,” he says.

“Our position on codes and in particular professionalism is that it is achieved through education, compliance to the law and most importantly, the behaviour of advisers.

“Compliance to the law is the minimum standard, and it is a high standard following the FoFA changes.”

The AFA recently met with licensees and ASIC Commissioner Peter Kell at the AFA Licensee Leadership Forum late last month to discuss codes of conduct.

“The AFA is acutely aware of the pressure advisers and licensees are feeling around implementing FoFA related changes,” Fox said.

“We are therefore very carefully considering the views of advisers and licensees in deciding whether the AFA should have a comprehensive code, that is ASIC approved, or whether it makes far more practical sense to have a two-part code with only the part relevant to obviating the need for opt-in approved by ASIC.”

Principles in reserve

Fox added that many advisers are not aware that if they elect to obviate the need for opt-in by belonging to an ASIC approved code (that meets the requirements of RG 183) the measures may apply to each and every client of the practice, not just those who become clients after July 1, 2013.

“I think advisers need to know that so they can make informed choices,” he said.

Fox is in favour of two-part code that would mean AFA members are all subject to the core principles-based part one code guiding professional behaviour.

Members could then elect to belong to part two, which would allow them to obviate the need for opt-in by applying additional service requirements across clients.

“This appears to be a practical way of helping our members choose a code that suits their preferred business model and which is also compliant,” Fox said.

“However the option of a two-part code will be subject to further discussions with, and consideration by, ASIC. It’s an alternative worthy of consideration by advisers, licensees, and the regulator.”

To watch a video interview with Brad Fox, click here.

One comment on “AFA cold on professional code … but two might work”

    Still getting dragged kicking and screaming…

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