Issues Linger Around FASEA Code of Ethics – Adviser Conflict of Interest


In Australia the critical importance of documenting reasons for the amount of life insurance recommended to clients has been driven home to advisers during the AFA’s 2020 Roadshow series.

This message was delivered by AFA GM Policy & Professionalism, Phil Anderson, within the context of lingering concerns he says the AFA still holds around the interpretation of adviser conflicts of interest within Standard Three of the proposed FASEA Advisers Code of Ethics.

Click here to access FASEA’s Preliminary Response to Submissions on its Financial Planners and Advisers Code of Ethics 2019 Guidance, released on 20 December 2019…

Notwithstanding additional guidance released by FASEA just before Christmas (see: …Green Light for Risk Commissions) – Anderson has been sharing the Association’s concern around one of the guidance notes for Standard Three.

According to Anderson, his concern about what may drive future conflict of interest relates not to adviser commission levels or choice of product (now capped at 60 percent upfront) but rather with the level of life insurance recommended to the client. He cautioned advisers about what he described as a ‘legalistic’ phrase which states:

A disinterested or unbiased person, in possession of all the facts, would reasonably conclude that the remuneration would not lead the adviser to prefer the interests of someone (including their own) over the client’s best interest.

…it is critical that you adequately document why you’ve selected the level of cover you’ve recommended

Anderson was unequivocal in advocating to advisers that they are able to demonstrate – every time – that the amount of insurance they recommend for their clients is appropriate to their circumstances and serves their best interests.

“Therefore it is critical that you adequately document why you’ve selected the level of cover you’ve [recommended] …and that you can demonstrate why that’s in the best interests of the client,” he said.

The message around potential future conflict of interest under the FASEA Code of Ethics was one of a host of current topics considered by both Anderson and AFA CEO, Phil Kewin, as they provided an update on the AFA’s positions on and activities around the many changes and other issues impacting the financial services sector in general and the financial advice sector in particular.

One of the ‘good news’ areas covered by Anderson related to the FASEA Adviser Exam results to date, which have delivered an average pass rate of 88 percent of those sitting the first three exam series, and who represent around 20 percent of the overall adviser community. Roadshow attendees were provided with this summary:

This table summary was presented to attendees at the 2020 AFA Roadshow series in February, indicating a high pass rate for the 20 percent of advisers who have already taken the FASEA Adviser Exam…