The continuous debate over Standard 3 would be simpler if conflicts were subordinated to client best interests in the Code of Ethics, which experts have highlighted is already the case.

“When I’m talking to advisors about how you need to apply the code, I always tell them, just put Standard 3 aside and try to apply the remaining 11 standards, and then come back to standard three. Because if you apply Standard 1 and 2 – and skip Standard 3 for a second – and then go five, six, and seven, all the way to 12, and then come back to three you’ll find the spirit would be effectively complied with,” Nidal Danoun, principal director of Prosperity Financial Services and ethics expert told Professional Planner’s Ethics for Advisers recently. You can hear his comments as part of the podcast series here.

Danoun’s description of how to navigate the Code and the contentious Standard 3 were made in advance of last week’s announcement by the Financial Adviser Standards and Ethics Authority that it would take two alternatives to the industry for consultation.

Danoun said he believed FASEA’s existing explanation that the standards should be applied holistically is adequate to navigate the Code in its current form in relation to conflicts.

“I feel for them [FASEA] because… they’ve said if there’s conflict then walk away. Then they’ve realised, well hang on a second, if we’re going to apply this to practice that’s going to be quite difficult apply, then they came out with something which I thought was smart to say… you need to apply the code in a holistic way,” he said

Other experts including Kym Bailey, technical services manager at JB Were, agreed that the existing wording of the code provided adequate guidance for advisers to navigate Standard 3 by making client best interests the overall focus. You can hear Bailey’s comments relating to the Code here.

“If you’re acting in the best interest of the client… what does that mean? That means the advice appropriate, you put the client interests first, you’ve done your research, you ensure that everything that you’ve done is in the best interest of the client. So once you’ve done all of that, I would have thought that Standard 3 would be satisfied,” Danoun described.

Of the two examples FASEA is now taking back to the industry for consultation, one of those specifically subordinates conflicts to client best interests along the lines Danoun and other experts have already been advising.

“You must only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest,” the proposed new standard out for consultation started.

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