Advisers can help themselves adapt to the new Code of Ethics by tapping into the creative side of their thinking when it comes to ethical dilemmas according to Tracy Wilcox, the UNSW Business School’s academic director of postgraduate programs.
The challenge of acting ethically in an unethical world is one that most people struggle with, Wilcox says, but even moreso for advisers who now have a professional code on top of the responsibility for their clients’ financial prosperity.
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There are external pressures, she says, that will inevitably force advisers to make uneasy decisions. Not every adviser will see these pressures in the same way, but the ones that take a broader and more open perspective will tend to act more professionally.
“Seeing an ethical dilemma depends on moral imagination,” Wilcox says. “It’s about creativity and putting yourselves in the shoes of other people and seeing what it’s like from other perspectives.”
A key part of the ethical decision-making process, she believes, is having the capacity to see a bigger question in a small issue. For example, she says, one might ask themselves what would happen if everyone took a particular course of action that an adviser was considering.
Technical and Ethical Uncertainty
While the Code of Ethics was criticised when it was released for not having enough prescriptive guidance, Wilcox says FASEA is trying to get advisers to think of who they are and how they operate as professionals.
Open-ended edicts like standard three, which tells advisers not to “advise, refer or act” if a conflict exists are meant to be actively interpreted, she says.
“Often when we think about the standards we get this compliance mindset and think of the letter of the law,” she says. “But one of the things that makes financial planning a profession is technical and ethical uncertainty.”
Indeed, FASEA chief executive Stephen Glenfield has implored advisers to read the code “as a whole”, and to put the “spirit” of the standards into context. This agency to apply the ethics framework to individual practice is key, Wilcox explains.
“The uncertainty is what distinguishes the profession from a job,” she says. “I’m a strong believer in giving stakeholders agency to make their own choices because the code is about the spirit of the law, not the letter of the law, and the intention of the code is to give that agency.”
Taking agency
The professor acknowledges that getting comfortable with a Code of Ethics that requires active interpretation may take time. She understands, also, just how high the stakes are for advisers.
“The other thing about professionals is that they can be sanctioned,” Wilcox says.
While the job of policing the ethics code is being performed by licensees in a caretaking role for now, the government’s eventual single disciplinary body will likely take a more formalised approach. In the meanwhile, advisers will have the opportunity to get used to the agency FASEA is asking them to take.
“Getting comfortable with that agency might take another year,” she says. “It’s not going to be resolved in the next six months.”
Along the way, she adds, the code itself may evolve into something different than the one we see before us.
“It’s only as you put things like this into practice that you begin to see how they operate,” she says.
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FASEA is a shambles and only adds to the complexity and rising costs associated with an industry in rapid decline.
A more simplistic and realistic strategy into the future is required. And required now.
The FASEA exam will only speed up the exit from the industry of many experienced advisors who no longer can see the light at the end of the tunnel.
With very few advisors with any experience coming into the industry and those most experienced leaving the industry, cost of advice can only go up.
Both of the previous comments are right on the money. Unfortunately Professional Planner continues to focus it’s journalistic effort on the rose-coloured view that everything is wonderful and that they, along with the academics and the regulator have “fixed” the problem. This campaign has been ongoing for years and because these commentators have so much invested in this viewpoint the real issues of devastation are pushed aside.
I think they are now getting a sense that their grand plan is going awry. As financial planners we know that the numbers don’t lie. Hence the patronizing articles of the past few days that reveal how little these people understand.
There will be a remnant of the industry that will thrive and survive. They will be giving advice to the relatively wealthy. The rest will be left to the unions and the spruikers.
Open-ended edicts like standard three, which tells advisers not to “advise, refer or act” if a conflict exists are meant to be actively interpreted.
This makes sense, though does not carry through at a Compliance / Audit level.
Communicating and actively interpreting with an Auditor, is akin to requesting some real world perspective from a computer program.
The consensus from many advisers, is that the process does not match the spirit and what we have is an intractable attitude of compliance, based on fear and potential further action from the Regulator who also follow intractable and at times, totally impractical protocols.
We are witnessing mass adviser walkouts, which will lead to the destruction of the Retail Life Insurance Industry and the blame in part, lies with an over Zealous interpretation of Regulations and rules that do not fit into any commercial reality, or common sense.
Ethics are inherent in any Business dealings, though when rules that can be and are taken out of context, then used to further alienate advisers, causing most of them to contemplate giving up providing great advice, which they have done for decades, where are the ethics in that?
People who have little hands on experience working with and advising clients, need to spend more time listening and learning from those who do.
There must be a change in the way advisers are allowed to do their job, as currently, it is a maze of complexity, with gatekeepers who have little knowledge of how the real world works and who are causing mayhem for everyone.
I find the comment “the code itself may evolve into something different than the one we see before us” quite interesting. Is that based on advanced knowledge of discussions that are underway at present? I’m interested because as we know the Code does not blend easily with the black-letter law that advisers and licensees operate under.
There has been a lot of commentary from Mr Glenfield and others suggesting that code should not be read too literally and its more about the “spirit” and the “vibe” etc. But look at how the code has been written;
Stnd 1: You MUST act in accordance with all applicable laws …
Stnd 3: You MUST not advise, refer or act …
Stnd 4: You may act for a client ONLY with the client’s free, prior and informed consent …
Stnd 5: You MUST be satisfied that the client understands your advice …
Stnd 6: You MUST take into account the broad effects of the client acting on your advice …
I don’t need to go on. The standards are quite explicit not only in the professional and ethical behaviours expected of financial advisers, but also in operational aspects relating to the advice process such evidencing the value of fees, client engagement and consent, client understanding of the recommendations, investigation of the full extent of a client’s financial situation and needs, conflicts of interest, record-keeping and CPD to name a few.
Licensees and their representatives are bound by black-letter legislation and regulation. AFCA have their own interpretation of the standards and are applying them in claims. Licensees have had to interpret and build systems to implement these standards into their supervision and monitoring regimes spending many months and millions of dollars.
I would like the commentators to move beyond an academic appreciation of the warm and fuzzy “spirit” and “vibe” of the standards to how best to implement them in practice noting that all of the black-letter requirements of advice construction from FoFA (and as enforced by ASIC) have not gone away. And noting Danielle Press’ comments from yesterday’s story “Advice delivery could be cheaper, ASIC investigates” (https://www.professionalplanner.com.au/2020/07/advice-delivery-could-be-cheaper-asic-investigates/comment-page-1/?unapproved=35480&moderation-hash=6a168c293824c826248fc98987047da1#comment-35480), ASIC wants to look at every option first without changing the legislation. The industry needs some relief.