The Code of Ethics for financial advisers is not about catching out bad players and adding layers of new conditions, says Australian Financial Complaints Authority (AFCA) deputy chief ombudsman June Smith.
“I don’t see ethics that way at all,’’ Smith says in Episode 3 of Professional Planner’s Ethics for Advisers podcast.
“We are in the people business, human relationships, so how this profession and each adviser is going to engage and relate to people when dealing with their issues is critical.
“At some level the new professional standards that are currently being implemented were designed to bring up standards and clarify, but if that’s our sole frame of reference we might be missing a real opportunity.”
Smith says there are three sets of values driving planners to exercise good decisions – the moral value, corporate values and the company culture of the organisation in which they work.
She says financial planners play a positive and critical role in delivering much-needed services to Australians and these new principles, agreed upon by every member of the profession, lift the industry’s reputation.
Retirewell Financial Planning director Tony Gillett, a 23-year veteran of the industry, says financial planners are in the most difficult part of the journey towards professionalism.
“We all have to sit the The Financial Adviser Standards and Ethics Authority (FASEA) exam and the way the process has been approached has been a bit brutal, particularly for older members of our emerging profession,’’ Gillett says.
“My big concern there is that there won’t be enough trained, good and experienced people around to mentor.”
He says the introduction of the FASEA Code of Ethics has been “the best thing that has happened to this industry”.
“The Financial Planners Association did some really good work in the ‘90s and established the first Code of Ethics but unfortunately not everybody was a member of that body,’’ he says. “Now we have a code that applies to everybody and is central to everything we do and the way we act as financial planners.
“Sitting the exam has caused everyone to be a lot more involved and study and to appreciate it’s a very essential step on the path.”
Gillett says the exam and the new code has forced him to think about the moral and ethical issues all planners face.
“I was sceptical, but I now believe you can train a person to deliver advice within an ethical framework,’’ he says. “You can teach an old dog new tricks and I think we’ve got to do that.
“I believe all the overbearing compliance obligations that we’re forced to go through… is part of the journey.
Gillett says bringing the industry closer to a profession will be assisted if the Australian Legal Reform Commission recommending removal Chapter Seven from the Corporations Act and everyone works towards tertiary qualifications.
“When we get to the point that everybody has a degree or equivalent then we will be a recognised profession,’’ he says, adding that the industry has “three to five years” left to go in the journey.
“When we get to that point and we’re recognised as professionals a lot of this over-bearing compliance will drop away or be reduced.”
Smith says the number of complaints against financial planners coming to AFCA was dropping and there are some errors being made, but no one could reduce complaints to zero.
“Most of the time at AFCA what we really see are issues to do with the culture of the licensee. That’s around business models and one size fits all,’’ Smith says.
The FASEA Code talks about the context of the corporation for whom advisers work and a culture that will deliver on clients first. Smith says there are shifts in intergenerational approaches to the industry and in the way advisers do business.
‘If you put a good person in a good corporate culture you’ll get good outcomes,’’ she says.
The opposite is a person who cannot reason through an ethical dilemma in the wrong culture.
“Even people with good moral compasses experience a moral hazard and the values just don’t fit or can be driven to do the wrong things,” Smith says. “The factors that will influence that are the culture, ethical leadership within that organisation.”
Value-based businesses actually make money, she explained, and it is not a trade-off between profit and doing good.
“This is about leveraging a client’s value proposition anchored to client first service value and drive profit that way.”