The Financial Adviser Standards and Ethics Authority has relented to consternation about its treatment of conflicts in the Code of Ethics and gone to consultation with two alternatives to the directive that advisers must not “advise, refer or act” where a conflict exists.

In a release this morning, FASEA said that after “ongoing commentary” from stakeholders that Standard 3 is “not workable” and that the guidance is ill-suited for legal interpretation, it had narrowed feedback into six broad suggestions.

One of these – to revert to the original 2018 wording which said to not “advise, refer or act in any manner if you would derive inappropriate personal advantage” – was rejected by the authority as it “fails to give clear intent”.

Another suggestion – to specify that timeshare advisers be exempt from the Code – seems to have been dismissed outright as well.

In the end, FASEA put two options forward that broadly cater to the remaining industry suggestions.

The first of these incorporates FASEA’s intent in the standard, but in a way which may be slightly more palable to advisers:

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 second sticks closely to the Hayne royal commission finding that conflicts should be eliminated rather than managed as per the Corporations Act, while still retinaing some of the Act’s spirit:

“You must not receive any benefit (whether monetary or non-monetary), nor enter into any relationship, that could reasonably be expected to influence the advice you give or the service you provide to your client.”

Retaining the original 2018 wording of the standard was put forward as a third option. FASEA also invited stakeholders to propose other wording that may be suitable, with the caveat that it must realise the current (and continuing) intent of the standard and enable “effective implementation”.

Otherwise, FASEA said, the options put forward should be judged on their practical application in terms of consumer experience, adviser practice, licensee practice and guidance.

“FASEA is committed to preserving the intent of the current Code; namely, that financial advice only be offered by advisers who are free from conflict,” the consultation stated. “FASEA is also open to making changes to the means by which this clear intent is realised through the provisions of its Code.”

The consultation, which opens on Tuesday, will run for less than a month and close on December 1.

‘Impossible to manage’