Euphoric reactions on social media hailing the downfall of the Financial Adviser Standards and Ethics Authority are missing the point completely. Those commentators appear to believe that FASEA has been an impediment to progressing the industry’s interests and that its termination will somehow improve their lot in life. However, they should remember that FASEA did precisely what the government asked it to do.

Whatever we might think of FASEA’s approach, it did the job comprehensively by prescribing mandatory tertiary education standards and issuing a Code of Ethics to which all financial advisers must adhere from 1 January 2020. Those outcomes are now embedded in the law and regulations for which Treasury has ultimate responsibility and which ASIC is required to administer in the public interest (not in the interests of financial advisers).

Some social media commentators appear to believe that the government’s decision to terminate FASEA is part of a larger strategy to wind back its pronouncements. As a result, ASIC will become much more accommodating and understanding of the industry’s commercial positions on all manner of subjects, including conflicts of interest, disclosure and commissions. I respectfully urge those who believe this (or who would like to believe it) to think again. I would remind them that the law cannot be diluted at the stroke of a pen or at the whim of a sympathetic regulator.

Of course, there will always be room for constructive criticism and suggestions for improvement, but the basic principles are there in plain English for everyone to read. That includes the controversial standard 3 of the Code of Ethics. It reads: “You must not advise, refer or act in any other manner where you have a conflict of interest or duty.” Given that the law is still in place, is anyone seriously suggesting that commissions, asset fees, profit shares and similar product sales incentives can co-exist with standard 3? Surely not, given the clear words in the standard.

And yet, in the absence (until now) of a policing mechanism, it seems that many industry participants have been ignoring the law and have carried on with ‘business as usual’ as though the law doesn’t exist. Astonishingly, some AFSL holders, who are legally responsible for the compliance of advisers, appear to have gone along with this behaviour and in some cases, appear to have facilitated or encouraged it. Who would have thought we would see the day when those who are legally responsible for compliance knew that advisers under their licences were acting in breach of the mandatory Code of Ethics and allowed those practices to continue?

My message to those industry participants who have been so critical of FASEA and have welcomed its demise is that you should be careful what you wish for. Instead of dealing with a small, relatively accessible and under-resourced body charged with prescribing standards, the industry will now be dealing with a large and bureaucratic government department (Treasury) with many other pressing priorities and a regulator (ASIC) whose duty is to administer the law as it is written (not as the industry would wish it to be) in the interests of consumers.

Both Treasury and ASIC will be well aware that a diluted or weakly enforced code will lead to more poor behaviour, more systemic malpractice and to more scandals, as recently revealed by the Hayne royal commission. They will also be aware that should this happen again the government of the day will not be able to escape criticism. They will wear it, fairly and squarely, and will deserve to do so.

Any attempt to lobby government and the regulator to accommodate the industry and its conflicted practices is bound to fail. So instead of complaining about an uncooperative government body which won’t tell them what they want to hear, I recommend that the industry’s leaders should adopt the approach which was flagged by FASEA at the outset.

Industry leaders should endorse the spirit and substance of the Code of Ethics and accept that there will be inconvenient commercial consequences for some of the industry’s participants. If they were to do that, many substantial benefits would follow. Most of the complex compliance rules would become unnecessary, the cost of advice would reduce, advisers would be trusted to act in their clients’ best interests and many more people would seek advice at a cost they could afford. However, to achieve this the industry’s professional bodies must demonstrate leadership by articulating a clear vision in support of the Code and its principles, not a compromised version of it designed to appease the vested and conflicted interests of some advisers within their membership bases.

I acknowledge that the above may not happen any time soon because most professional bodies have forgotten what it means to be a profession. In a world increasingly dominated since the 1990s by neoliberalism, professional bodies have become more like occupational guilds and lobbyists. They have been overwhelmed by the imperative to grow membership numbers, to offer member benefits and services, to defend or ignore poor practices of members who are destroying the public value of the professions from within and to appease noisy members who complain and threaten to resign if they don’t get their way.

There’s no shortage of high-principled rhetoric and inspiring spin coming from these bodies about the importance of professional and ethical standards, but there’s limited serious interest in disciplining members who breach them. The hypocrisy is breathtaking. In short, the professional bodies have been hoisted on their own petards.

My own profession of accounting is a leading offender. When it comes to financial advice, it has dropped the ball and shows no sign of redemption any time soon. Rather than criticising and even ignoring the mandatory Code of Ethics, the financial advice industry should acknowledge that FASEA has done it a favour. That’s because the principles-based Code offers a once in a generation opportunity to remove the unworkable, demoralising, costly and ineffective compliance regime. Furthermore, it shows the industry a clear and eminently practical path towards trust and professionalism.

If only we’d show the courage and leadership to walk it. Failing that, the industry is guaranteed to face an uncertain and discouraging future of more complex and intrusive regulation, more cost, more distrust, more scandals and no prospect of ever being treated as the true profession which it aspires to be.