The Association of Financial Advisers’ release this week of a paper entitled Code of Conduct – 6 Principles of Professionalism sets the scene for the association to produce a full-blown code of professional conduct in coming months.
Its release is timely. Codes of conduct will form part of a current Parliamentary Joint Committee (PJC) on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry. Until yesterday, the AFA’s most recent pronouncement on its code was a two-year-old consultation paper.
The inquiry’s terms of reference include examining the implications of requiring financial planners to “adopt professional standards or rules of professional conduct which would govern the professional and ethical behaviour of financial advisers”. It will also examine the “professional regulation of such standards or rules”.
The AFA says it has “held back” from producing its code before now, citing uncertainty surrounding industry, parliamentary and regulatory issues. The final code will be refined “in light of ongoing changes in the legislation and regulation which affect matters such as the Opt-in exemption”.
The precursor to the new code sets out six principles:
1. Integrity and professional conduct
2. Best interests
3. Conflicts of interest
4. Informed client consent
5. Service standards
6. Professional expertise
It replaces and consolidates 10 principles set out in the consultation paper published in July 2012, which also included principles relating to remuneration, product selection and replacement, relevant information, educating clients, confidential information, service standards and professional competence.
The code is designed to help AFA’s 2300 individual members and the 6000 to 6500 who have not joined directly but who are representatives of its “licensee partners” to get “clear on the behaviours that their professional body and their peers see as essential conduct for professional financial advisers”.
“Our members have been responsible for and held to a code for decades but the continued progression of financial advice toward being a recognised profession means the code’s relevance and value as a symbol of safety to consumers has increased,” AFA chief executive officer Brad Fox says.
Fox says the association has received early feedback that the principles of practice are “appropriate and practical in terms of language and application”.
While the development of the code will , the second part of the PJC inquiry terms of reference set out above includes the “professional regulation of such standards or rules”.
A key aspect of professional codes of conduct – and an issue to be specifically examined by the PJC – is regulation of standards and codes.
The AFA says all of its members – it has 11 separate membership categories – must abide by the six principles, as well as the association’s “broader Code of Conduct and the AFA Constitution and By-Laws”, in addition to their legal obligations.
The AFA’s disciplinary matters are divided into two – those dealt with directly by the board, and those dealt with by a disciplinary committee convened by the board.
