FASEA CEO Stephen Glenfield says the Authority took a new approach with its second guidance document for the Code of Ethics, explaining the 12 standards and five core values in a deliberately clearer and more direct manner, with less legal speak and a focus on areas of contention raised by stakeholders.

And there’s more to come, he adds, with FASEA now sifting through 40 submissions in response to the latest guidance which will feed into another update before the end of the year.

While he believes the original October 2019 guidance document was “very useable”, Glenfield tells Professional Planner FASEA received feedback that advisers didn’t understand the standards’ reasoning and were “confused” about how to put elements of the code into practice.

“The overwhelming response coming back was that stakeholders would like to understand the intent of the standards and how you would apply them,” Glenfield says.

While some of the issues were dealt with in the ‘preliminary response’ to feedback FASEA published in December last year, this second version of the guidance changes the format completely; instead of using long-winded examples, each of the standards is broken down by their intent and how they’re applied, with short Q&As aimed at clearing up common misunderstandings.

“It was very deliberate,” Glenfield says. “ In the second version I wanted to get out something that was in very plain English saying ‘this is the code, this is the intent and this is how you can apply it in these circumstances’.”

Smoothing out the conflicts

In line with Glenfield’s desire for clarity, the latest guidance tackles issues like conflicts, referrals, commissions and scaled advice more directly.

Standard 3, which has proved the most contentious, approaches conflicts in a markedly different way. The first guidance document spoke of an industry “beset with conflicts” and outlined scenarios where advisers could be remunerated without being in breach. It was poorly received, inviting debate around what “duly remunerated” meant – especially with regards to insurance advice commissions – and whether a perceived conflict, rather than an actual one, would constitute a breach.

In contrast, the second guidance document makes it clear that the code is “concerned with an actual conflict”, and “does not seek to ban any form of remuneration, nor does it determine that particular forms of remuneration will always give rise to an actual conflict of interest or duty”.

This week the Association of Financial Advisers responded to the new version by repeating its charge that standard 3 is “unworkable”, primarily because insurance commissions constitute a conflict by their very nature, albeit one that is managed as per the Corporations Act.

The new guidance shows that standard 3 is very much workable, Glenfield believes. “We make the clear point that it’s not stopping commissions.”

The second version actually changes tack on the issue of providing advice to divorcing clients, which Glenfield readily admits came about after advisers explained the variable dynamics involved.

“There’s an example in the first version that was more definitive about not acting with divorcing clients, but it was clear when talking to stakeholders there were circumstances where you can,” he says.