UNSW Business School's Dr Tracy Wilcox

Take the time to stop and think, and be aware of your own biases – these are the two principles that can help advisers develop ethical habits and navigate their obligations under FASEA’s new Code of Ethics, according to Dr Tracy Wilcox, UNSW Business School’s academic director of postgraduate programs.

With advisers for the first time undertaking exams to test their understanding and practical application of ethics in light of their statutory obligations under a new code from January 1, Wilcox suggests advisers start first with their ethical mindset instead of thinking about FASEA’s Code of Ethics as another set of rules.

“Ethics is about practical reasoning, it’s about how do we think about something and apply the tools to a specific situation,” Wilcox, who has helped design UNSW business school’s ethics program, told delegates at the SMSF Association’s national conference on Wednesday.

Wilcox joined Colonial First State’s Craig Day during a session where the pair picked apart real life ethical scenarios. At the end of February, Professional Planner will launch its own ethics & professionalism podcast series in which six experts will weigh in on the resolution of ethical scenarios submitted by readers.

Wilcox outlined the three ethical frameworks which she encourages individuals to use in their “ethics tool box”. Consequentialism (Utilitarianism), Virtue Ethics and Deontology are the three ethical philosophies advisers will likely draw on as they approach their obligations under the new Code, Wilcox noted.

“The important thing about ethics is not necessarily about having the correct answer, it’s about having something I can justify. It’s about taking time to stop and think,” she said.

Acknowledging our own cognitive biases and how these biases might influence advice outcomes is an important part of developing ethical habits for advisers, Wilcox continued.

“In our daily life we are influenced by our cognitive biases, we are influenced by the mental models we adopt and the way we view the world. We are influenced by the assumptions we make which are taken for granted and we are not even aware we are making them, so they’re unconscious. The biases and assumptions make you look at a situation in a particular way and you don’t see alternatives,” she described.

“Part of ethical thinking,” Wilcox said, “is being aware and stopping and saying, ‘how have I arrived at this decision taking into account my biases, should I just take a moment to stop and think, should I be more reflective about my assumptions?’”

Further, considering the implication and impact on the community, beyond the individual and even the client will be an important evolution in the way advisers think and they develop ethical habits, she continued.

“There is always a technical way to get around a rule. But if we all think of it that way, what does it tell society about our profession?”

Smith is the editor of Professional Planner’s print and digital platforms. He is an experienced financial journalist, editor and multimedia producer who has held senior editorial positions both in mainstream press and trade media.
2 comments on “Surviving the Code of Ethics 101”
  1. Is the real issue thee broader concept of “ethics” or is it actual an issue of catastrophic “ethical fading”?

    It would be very interesting to know if there is currently any research papers or academic studies that relate to “Ethical Fading” within the Australian Financial Services industry.

    In particular, it would be interesting to know if there is any such academic research or studies is being undertaken in the context of AMP as a case study, or any of the major banks? What about a study contrasting ethical fading at the Financial Adviser Practice level with that within a larger institution?

    The discussion around ethics is interesting as it seems to have evolved in to one of “how Financial Advisers should deal with ethics” as opposed to a thorough analysis of what the actual ethical issues have been over the last 10 to 20 years or so in the Financial Advice industry, and what changes or strategic re-thinks need to occur to enable any such opportunities for ethical fading to occur.

    Does the problem lie predominantly at the Practice level? Or is the challenge with ethics a top-down issue within the framework of larger advice networks where remuneration and short-termism are factors influencing individual ethical decision making?

  2. Avatar Craig Meldrum

    We just completed a 3 week national FASEA Roadshow for all of our advisers. The sessions included a discussion on ethics and professional. I’m finding advisers, in a Kubler-Ross sense, have moved through the stages of denial and anger and are broadly understanding of the intent of the ethical principles and the values that underpin them. What they require more at this time, given the standards went live 1 January, is the firm guidance, tools and support to distill a broad set of ethical and professional guidelines into practical and implementable solutions in their practices, in other words, “tell me how can I do all that I need to do as efficiently as possible so I can continue to look after my clients.” The changes have already increased the cost of advice to the point where many loyal clients are now been priced out of accessing quality advice.

    At a licensee level, without firm guidance, and with AFCA adopting the FASEA standards in their approach to claims handling from 1 January, and ASIC charging licensees with the task of interpreting and implementing the Code provisions, I don’t believe we have the luxury of burying our heads and waiting for better guidance and support from FASEA.

    We’ve been on this journey for a while now and it has basically changed everything we do – the advice process, our systems, our forms and our compliance and risk management processes. The advice process is longer, more complex and has to balance the juxtaposition of the licensee’s statutory and regulatory provisions under the Corps Act with the less-defined but equally important requirements of the Code. The extra costs incurred by licensees and their representatives, plus implementation of the soon-to-be legislated proposals from the Royal Commission, rising PI insurance, the ASIC self-funding levy, further tertiary study, the looming compensation scheme of last resort, etc is having an enormous and negative effect on the cost of advice to the point where it is becoming increasing unaffordable for ordinary Australians to access, which is the real tragedy.

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