Financial advisers and planners will not buy-in to a Code of Ethics driven by centralised leadership such as the Financial Planners Association or the Association of Financial Advisers, says Ethilogical Consulting principal Gordon Young.
Young, whose Melbourne-based consultancy helps businesses understand best-practice decision making techniques and develop good ethical values, says the Financial Adviser Standards and Ethics Authority (FASEA)’s Code of Ethics must be championed by individuals.
“Individuals have a strong role to play here as well as collectively,’’ Young told Professional Planner’s podcast series Ethics of Advisers.
“All too often we see top-down approaches, and they have their place… but if you take a purely top-down approach there will be no buy-in by the members… it’s just something they comply with. This is the opportunity for individuals within the profession to have input.
Recent moves to develop the profession have been chaotic with the introduction of compulsory training and standards but this presented a “raw opportunity” to shape the industry and have control over its future, Young says.
Zebra Tailored Wealth founder Alysia Laird says her business started in concert with the new rules and had been unencumbered by grandfathering issues and commissions, outlined in Standard 7 of the Code, that more established businesses might have.
“Standard 7 is causing a lot of contention with receiving benefits from third parties rather than from clients. For us, we have never taken any of these payments. I can see why it’s a really complicated issue for some practices,’’ Laird says.
Standard 6, which compels planners to take into account the broad effects from the client acting on their advice and their broader, long-term interests and circumstances, was the “stickiest” of the Code’s 12 standards because it was open to interpretation, Laird says.
Standard 3, which warns advisers not to act in any manner where this is a conflict of interest, had little impact for her boutique financial advice firm but those with vertically integrated businesses would be working hard to get on top of conflicts, Laird says.
“There will always be issues with vertical integration and my licensees are our advice group who are owned by IOOF that own a number of licensees,’’ she says.
“There are definitely issues that have to be content with and change over time. It will be different every year.”
She is optimistic that Standard 12, which calls on the adviser community to uphold the standard of the profession, would continue its strong trajectory.
“I love standard 12, holding each other accountable, and I feel like the financial planning community has bonded together over the past few years. I feel like it’s been a great thing for advisers,’’ she says.
“I now have a ridiculous amount of fabulous contacts across all licensees and the advice community and it’s pretty great.’’
She noted the positive impact of the financial planner platform and online community XY Adviser, which had brought many of the profession’s members together to share their experiences of the changes.
Young says XY Advisers is one example of an emerging ethical leader in the profession but wondered who would take control of the narrative.
“The FASEA Code, in particular as a Code, is a good code but these codes are always limited,’’ he says.
“A set of rules will be simplistic therefore you need to rely on values and culture as well as professional judgement. This is the game right now to the profession. What will be the norm? What will be ‘the done thing’ in this space?”
He says an example to follow is the medical profession where community trust is “off the charts” on individuals’ ethics within it.
“You trust the profession and the reason isn’t because there aren’t bad people inside. It’s because it’s been internalised… because it’s a lived experience for them, it’s not something they’ve written on a wall and just pay lip service to.”