Scott Hoger

Clients that aren’t forthcoming about all required information leave advisers in an ethical tight spot due to Standard 6 of the Code of Ethics according to TAL.

Standard 6 of the FASEA code states “you must take into account the broad effects arising from the client acting on your advice and actively consider the client’s broader, long-term interests and likely circumstances”.

Speaking on an AFA webinar, TAL national technical manager Scott Hoger said financial advisers are not relieved of their ethical duty to look more widely at a client’s needs even if they aren’t providing enough information when asked.

“We haven’t seen what this looks like from an enforcement period just yet,” Hoger said, noting there isn’t an established precedent for an adviser breaching the standard in this context.

Hoger said the adviser has the responsibility because they hold in the power in the relationship with the client.

“If the client gives you the wrong information or not enough information for the advice area you’re looking to give advice in, it’s not on them.”

Standard 6 has been a matter of contention since the code was introduced due to its open-ended interpretation.

“In the absence of a crystal ball this is going to be a very costly exercise,” AFA’s chief executive Phil Anderson said in 2019. “You’re going to need to dig deep – deeper than you might have otherwise done – particularly if its only scaled advice that you’re providing.”

Objective reality

Hoger said determining what these client goals and objectives might be requires complete and accurate information.

“At the beginning you are trying to work out exactly what the client might need from a financial adviser and to determine the scope of advice you must have an understanding of what the client’s goals and objectives might be.”

They might explicitly mention what some of those goals are, Hoger said, but the adviser still has the responsibility to uncover the needs the client is unaware they have.

“Most clients don’t really know what they need or want especially when it comes to insurance. Your job is to identify not what the client explicitly seeks out but also help them work out what those other areas might be. You don’t have to give advice in those areas, but uncovering those needs are important.”

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