The proposal to have code monitoring bodies oversee advisers’ adherence to FASEA’s code of ethics “makes sense”, according to FPA chief executive Dante De Gori, because it will bring ethical standards under a single umbrella.

Speaking at the Professional Planner licensee summit this week, De Gori pointed to data showing that advisers who have to abide by a code of ethics are far less likely to be banned by ASIC.

“Since 2009/10 to 30 April this year, ASIC has permanently banned 216 advisers, and 90 per cent of those that are banned are non-members of the FPA,” he said.

De Gori’s point was that advisers who signed up to the Financial Planning Association’s own code of ethics had a much cleaner record than those that didn’t. “The FPA makes up about 40 per cent of the adviser population today but represents 10 per cent of the ASIC bans,” he said.

If adviser behaviour is so markedly different where an ethical code of conduct is involved, he explained, having an all-encompassing code – together with monitoring bodies – should be a positive.

“This process of code monitoring is a good thing [because] all advisers, no matter where they belong or what their business model is, will be subject to this code of ethics,” he said. “No one gets to choose to not be involved.”

Code monitoring bodies are part of the government’s mandate to reform professional standards for financial advisers, brought about by an amendment in the Corporations Act (2001) to raise education, training and ethical standards in the industry.

As part of the reforms advisers must sign up to a code of ethics, drafted by the Financial Adviser Standards and Ethics Authority, on 1 January, 2020. Adherence to the code will be monitored and enforced by the code monitoring bodies, who are in the process of being selected by the Australian Securities and Investments Commission.

The FPA leads a group of associations that has banded together to apply under the name Code Monitoring Australia, including the Association of Financial Advisers (AFA), Boutique Financial Planners (BFA), the Financial Services Institute of Australasia (FINSIA), the Self-managed Superannuation Fund Association (SMSF Association) and the Stockbrokers and Financial Advisers Association (SAFAA).

De Gori provided an update of the process, saying CMA was at the “final application”.

“Draft applications for any interested parties were required at the end of last year and final applications for those that wanted to proceed have to be submitted,” he revealed.

If CMA is accepted as a code monitoring body, De Gori added, it would mean the associations involved would no longer be conflicted in terms of providing both representation and discipline to their members – an issue highlighted in the Hayne royal commission.

“This takes care of that in terms of it not being done by the FPA, but effectively a separate legal entity which will have the sole responsibility of doing a compliance scheme operation that will be separately run and managed,” he said.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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