Griffith University’s accounting, finance and economics lecturer Dr Katherine Hunt conjures Harry Potter author JK Rowling to describe FASEA’s twelfth and final standard of its Code of Ethics – keeping peers accountable.
“It’s one thing to stand up to your enemies; it’s another thing entirely to stand up to your friends,” she quotes.
“If we notice one of our peers was really falling short of what we consider to be the behaviour of a professional – a particular standard – it’s the idea that we would have to pay the price and have a conversation with that person, which is what a professional would do… and of course offer guidance, offer support to try and get them back on the right path.
“That whole confrontation, even done in a gentle and respectful way, is such a high price,” she says.
Hunt, speaking with Prosperity Financial Services director Nidal Danoun on episode one of Professional Planner’s second podcast series Ethics for Advisers, says financial advisers have diligently implemented the Code since January 2020.
“Advisers have been absolute machines trying to incorporate every single one of the standards and the values and all of the rest of the requirements obviously into their businesses,’” she says.
“They’ve really been struggling with the logistical side but… they really understand the theory of why they’re doing it, why they’re journeying down that path.”
Hunt says implementation comes with a cost, citing a high performing financial adviser who took more than two hours to complete a fee disclosure statement.
“You can imagine if we bill ourselves out at a normal rate of $400 an hour, the client doesn’t want a disclosure statement of fees along with an $800 bill and of course it wouldn’t adhere to fees being fair and reasonable either,” she says.
“There’s this logistical challenge where we say: ‘yes this is great; let’s do it but, oh dear, how do we make that happen?'”
Prosperity’s Danoun says advisers did not resist adopting the Code despite the “interesting timing” ahead of the pandemic.
He says advisers now have a better process in educating clients to ensure genuine informed consent which is incorporated in Standards three, four and seven.
“What makes the values in the code of ethics challenging is… to bring it down to the practical and incorporating it into your practice,’” Danoun says.
Advisers already have “regulatory fatigue” and integrating the Code is hard, he says.
“Sometimes those ethical issues that do come out, sometimes they are not tangible and take time to play out.”
Danoun says training and mentoring staff is challenging and time would tell on how practices monitor it.
“To be fair, living in a once-in-100-year pandemic and trying to keep a practice afloat with that regulatory fatigue. I sincerely feel for advisers, they have a genuine intention to do the right thing.”
Hunt says conflicts of interest (standard three) was difficult to implement because advisers “exist in a constant quagmire of conflicts of interest” in advisers’ personal and professional spheres.
But Danoun tells advisers to skip this standard until they have applied the other 11 standards.
“I feel it will be Standard three’s spirit would be effectively complied with… it’s usually in the best interests of the client,” he says.
In developing ethical thinking, Danoun continues, advisers need to make an ethical decision-making framework where they identify, consider and reflect.
“The reflection is key and helps build those ethical muscles and those good habits,’” he says.