The financial planning industry routinely makes sense for its clients out of complex, convoluted and arcane taxation, social security and superannuation legislation. Adopting a new, industry-wide code of ethics for itself, therefore, should not be an unsurmountable challenge. Whatever struggles the industry is going through to adopt the new code should be worth it, given CoreData research shows that the impact on public trust in financial advice will be strongly positive.

FASEA’s Code of Ethics is designed to underpin and raise standards of professional and ethical behaviour. It does not replace or override the law. FASEA’s Financial Planners and Advisers Code of Ethics 2019 Guidance document explicitly states that the law takes precedence over the code if complying with the code would cause an adviser to break the law.

In all other scenarios and situations, the code is designed to allow a financial planner to exercise individual judgement on how best to deal with a client or a client’s situation, while also operating within the requirements of the law.

In essence, the code of ethics is asking financial planners to start to think like professionals. That may be the crux of the issue – in a world of tick-a-box compliance, it is new territory for some advisers and for some licensees, and it could help to explain the bamboozlement in certain quarters.

All professionals rely on experience, expertise and intellect to guide them through potentially tricky ethical situations with clients. They have worked out over many years how to do this, what’s acceptable and what’s not, often by consulting and collaborating with peers and colleagues. That’s the journey that the whole financial planning community is now embarking upon. It is part of the shift in thinking and behaving that financial planners signed up for when they decided they wanted to be treated and thought of as professionals.

“As with every profession, there is allowance for differences of professional opinion on how the ethical rules of the profession should apply in a particular case,” FASEA’s guidance says.

“Doing what is right will depend on the particular circumstances and requires you to exercise your professional judgement in the best interests of each of your clients” [emphasis added].

The guidance

Perhaps the code and guidance are proving a little difficult to assimilate because complying with a code of ethics doesn’t necessarily lend itself to simple yes-or-no answers. Nor can it be easily addressed by a prescriptive guide to compliance, the kind that advisers have grown up with and are used to. In many situations, the answer to the “best” course of action under the code will be: “it depends”.

All professionals inevitably encounter situations where a code of ethics appears to be at odds with the law, or where a code imposes behavioural conditions that are new or unexpected or at odds with historical commercial practice. That much is to be expected as professional behaviour and standards permeate the financial planning industry. Other professions cope with it.

Where FASEA’s guidance might have gone awry or caused confusion and concern is when it seeks to modify or change the impact or intent of an ethical standard.

A submission by the Financial Planning Association (FPA) on the code sums this up nicely and makes a lot of sense in an environment where sometimes the commentary borders on the non-sensical. As you’d expect, the FPA supports a code of ethics, having had one of its own for decades already. But it points out that FASEA can’t use its guidance document to try to modify the effect or intent of a legislated standard, because the guidance document itself has no legal standing. The code of ethics has been established by legislative instrument and the FPA says the guidance document “sits outside the legal powers bestowed on FASEA for setting the standards of the code of ethics”.

“It is important that codes and this code in particular raises trust, raises standards and protects consumers. It is therefore inappropriate for FASEA to introduce new requirements into the code via its guidance,” the FPA states.

And whether an adviser complies with the ethical standards in the way the guidance document suggests is doubly irrelevant, because even if FASEA were included to look kindly upon an adviser relying on its guidance, FASEA doesn’t actually monitor advisers’ compliance with the code anyway. That will be a new body that the government has yet to create, name, fund or staff.