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  • University : Deakin University
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FASEA Code of Ethics Framework Consultation

Introduction

Finance planning profession involves the certified financial planners that have undergone extensive training and have great experience of the rigorous ethical standards that are required to hold the position. These professionals assist the clients in bringing all the pieces of financial issues together and plan a better future for them. The finance planning professionals are required to follow a code of ethics wherein they must have a proper license to do the work, should be proper graduate and educated in the field and it is mandatory for them to comply with the code of conduct. The profession allows them to give appropriate disclosures and they have to agree to be bounded by the ethical standards while delivering the financial planning to the customers (Centre for Financial Planning 2019). They work for the benefit of the society with the highest ethical standards and professional standards.

The code of ethics followed by the finance planning professionals is a reflection of their work which gives the insight on their responsibilities towards their clients, employers and the colleagues. This report covers the objectives of Code of Ethics of Corporation Amendment Act 2017 for the finance planning professionals. It also compares the Codes of Ethics of the existing financial advice industries in Australia in the aspects of the difference in their styles, enforcement of the existing Code of Ethics, the structure and the guidance documentation. In this report, the final recommendations to FASEA on the important components for the new Code of Ethics framework will be included. 

FASEA (Financial Advice industry in Australia)

The Financial Adviser Standards and Ethics Authority (FASEA) sets the educational, training and ethical standards for the finance planning professionals. It also holds a responsibility for setting a Code of Ethics for the financial advisers which they are bound to comply with. It is mandatory for all the financial planning professionals to follow the code of ethics set by FASEA. The Financial Adviser Standards and Ethics Authority has set new CPD obligations for AFS license holders and their financial advisers, the process for the approval of foreign qualifications for the purpose of new education standards and the term for financial advisers who are in the year of completing their professional experience to become a provisional financial planner or adviser (CPA Australia, 2019). The professional standards for financial advisers were changed under The Corporations Amendment Act 2017. This act has reformed that has raised the ethical standards, ethical standards and the professional standards for financial advisers. This act has made a new independent industry for governing the professional standards for financial advisers. Various functions performed by this independent industry includes the approval of degrees and foreign qualifications that are required for education requirements, approve and administer a compulsory exam for all candidates, to set supervision requirements and to determine the requirements of continuing professional development (CPD).

The compliance schemes developed by the third parties will be approved by the Australian Securities and Investments Commission (ASIC). As per the amendments in this act, all the financial advisers must meet the annual requirements of continuing professional development. Australian Financial Services Licensees will now have to perform proper monitoring of the compliance of employees with the requirements of continuing professional development (Barry.Nilsson.Lawyers 2019). They will now also have the power to lodge a complaint stating a failure to AISC with the requirements. The major objective of this amendment is to make the finance advisers very professional and they should be experienced before starting with the practical work. The introductory and the transitional periods for the finance planning professionals include obtaining a degree, passing of the exam and undertaking a professional year. All the finance advisers must meet the continuing professional development (CPD) and all must comply with the code of conduct. The main purpose behind the reform that has taken place is to prepare the employees for the widespread reform to make sure the appropriate compliance. Professionals will closely monitor all the actions made by the new independent body FASEA and will start to implement it. 

In Australia, the financial planning industry has experienced a major reform from past ten years that has impacted financial advisers and planners, financial service industry, clients, regulators, educators and also the accounting profession (Cull 2019). 

Code of ethics of FASEA (Financial Advice industry in Australia)

The code of ethics issued by FASEA consist of set of principles and the core values that aims to lay down the foundation for the finance advisers and planners to emerge as a true employee. These principles provide a framework that shapes and reinforces the ethical conduct and makes the employees work towards the benefit of the client and the society (Financial Adviser Standards and Ethics Authority 2019). The codes are approved and supervised by ASIC and are a matter of legal obligation that lays a foundation for conduct for all the finance planning professionals. The standards of ethical behaviour states that all the employees should act as per the applicable laws and should not attempt to avoid the law or circumvent the intent. The employee should act with the best interest of their client and should always act with integrity. In case of the conflict of interest or the conflict of duty, an employee must not interfere or give advice in any manner.

The standards of client care includes that the employee must act for the client with their consent always and after the commencement of this code, the existing clients consent should be obtained again. All the recommendations and the advices provided to the customer should be in the best interest of them and should be best suitable according to the individual’s circumstances. Employer must also be satisfied with the understanding level of the client and should make sure that the customer has well understood the risk, cost and benefits of the recommended financial product (Financial Adviser Standards and Ethics Authority 2019). The employer should consider the broad aspects of the effects that the client preferred the recommended advice and service and should take this into account. The standard of quality process states that a proper consent should be drawn from the client for the benefits received by an employee and his given principles that includes the fees for different services provided by the employee to the client. The employee must not receive benefit other than those mentioned in the corporations act, 2001 from the client. The employee must understand that the benefit received from the client for the work and principle is fair and reasonable and should represent the money. The record of the clients should be complete and accurate always. An employer must offer the products or give recommendation that is not misleading or deceptive and should be in good faith.

The code of ethics of Financial Planning Standards Board (FPBS) is much similar to that of the financial advice industry in Australia. The difference between the two is the first principle of Financial Planning Standards Board that states that the client interest should be the priority of a good employee that is a hallmark of professionalism and should not try to gain benefit before the client’s interest (Financial Planning Standards Board 2011). The other principle added in this segment is the confidentiality. It states that the client’s information should always be kept confidential and should be accessed only by the authorized person. Keeping the information of the client confidential helps in building the trust and confidence with the client and this will benefit the organization. The other principle that is not followed by the code of ethics of the finance advice industry of Australia is diligence. It states that the employee should plan, supervise and deliver the professional services in a timely and thorough manner. The next principle states that every employee should have competence that is the ability to attain and keep the skill and knowledge needed to carry out the finance work (Financial Planning Standards Board 2011). It assist the employee in continuous learning and attaining the wisdom to identify own limitations and weaknesses and work towards them. 

Code of Ethics of other Australian profession (accounting profession)

The Code of Ethics of some other Australian profession is the Code of Ethics for Professional Accountants that is given by the Accounting Professional and Ethical Standards Board (APESB).  The first principle states the integrity that ensures that an employee is honest and straightforward in every business relationship. The second principle states the objectivity that does not let any kind of biasness happen and does not let the conflict of interest drive the business judgment. The third principle is the professional competence and due care that ensures competent professional service is delivered to the client and employer by maintaining the professional knowledge and skills of an employee (CPA Australia 2019). The next principle is the confidentiality that makes sure no employee discloses any information to the third party thus keeping every client’s information confidential and safe for a longer period of time. They are not even allowed to use the client’s personal information for any other advantage with the third party. The last principle of this Code of Ethics is professional behaviour.  This principle states that every employee should try and avoid any action that can make their profession troublesome and should comply with every rules and regulation made by the organization (CPA Australia 2019). 

The structure of Code of Ethics of Financial Planning Standards Board is different from the Code of Ethics of FASEA. The standards defined in FASEA are different from different aspects. There are standards for ethical behaviour of employees, the standards for client’s care, the standard for quality processes and the standard for professional commitments. The Code of Ethics of Financial Planning Standards Board are not defined separately for clients, for employees and for quality or professional commitments. They are a set of eight principles that covers all the aspects required from an employee for the benefit of the client. It does not take into account the benefit received by the employee for his work of recommendation and principles and only talks about the client satisfaction. The standards of FASEA also covers the employee satisfaction in making client understand the procedure for finance planning. The structure of Code of Ethics for professional is similar to that of Financial Planning Standards Board and is very different from that of FASEA (Financial Advice industry in Australia). The standards for professional accountants also does not take into account the employee satisfaction and talks about the integrity and customer satisfaction. The guidance documents explains the policies that are internal that makes the interaction with the third party easy. The guidance documents of FASEA (Financial Advice industry in Australia) is general for all finance advisers and is not specific for some organization.

The Code of Ethics of professional accountants and Financial Planning Standards Board are quite similar that explains the principles in brief and does not categorize the employee, customer satisfaction and quality commitment. The conceptual framework of all the three Code of Ethics is different. The conceptual framework of the Code of Ethics for professional accountants based on the threats created due to the circumstances to the compliance with fundamental principle. These Code of Ethics provide the foundation of the professional responsibility of the employees towards their work to deliver to the clients with highest ethical standards. The Code of Ethics of financial advice industry in Australia, the international Financial Planning Standards Board (FPBS) and professional accountants differ in the style, enforcement of existing Code of Ethics, structure and guidance documentation. 

The defined purpose of this documentation is to form new framework for Code of Ethics for of FASEA (Financial Advice industry in Australia). The new code of conduct will be managing ethics in the workplace involving the identification and prioritization of values that will guide behavior in the organization. The core values and principles that should be added in the new code of ethics should be inclusive of the updated version of the older principles with some amendments that are required according to the recent time. The conceptual framework on which the new code of ethics will be formed should be enhanced conceptual framework and it should be inclusive of the extensive revision of safeguards all through the code aligned to the threats. This new conceptual framework should more prominently feature the requirement for all the finance advisers to remain alert for the updated and new information or any amendments that are made in the principles and core values for this profession. The essential components that should be focused on forming the Code of Ethics is the employment satisfaction, client satisfaction and the delivery of financial recommendations and planning with the highest ethical standards and should address the concerns that have been raised in the past years. The changes should be made in compliance with the professional, educational and ethical standards of the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017. The principles in the Code of Ethics should be able to fulfill the achievement of defined purpose of delivering the financial advices with the ethical standards. The structure of the code of ethics should be well defined like that of FASEA (Financial Advice industry in Australia) that is it should be under carious standards

. The principle recommended for the code of Conduct is that the benefit received by the employee for his service and principles should be fair and worthy of the quality delivered by the employee. The employee should get the consent form signed before receiving the benefit from the client and should not accept any other kind of benefit which is not mentioned in the Corporations Act 2001. The client satisfaction should always be the priority and this hallmark of professionalism should be followed by all the financial advisers. All the fiancé advisers must be complied with the educational, training and ethical standards set by of FASEA (Financial Advice industry in Australia) in Australia. A standard of behavior should also be established that is expected from the finance adviser professional personnel that will reflect the profession’s recognition of its public interest responsibility. The next principle is that no employee should be the part of decision making in the case of conflict of interest and opinion. The conflict of interest leads to the creation of threats to compliance with many principles made for employees such as objectivity, confidentiality and integrity. Other principle recommended for the employees is that they all should recommend and plan the finance of the client with the best of their potential and should always be benefiting to the client and the society. Another important principle that should be followed by all the finance advisers is that the client’s information about their finance should be kept confidential and secure.

The disclosure of the personal and finance information to the third party for some other kind of benefit is not acceptable and it is against the professional ethics. The confidentiality of the information helps in building the good rapport and trust of the customer with the organization. Professional competence is highly required in the employees working as the finance advisers because they need to attain and maintain the knowledge related to finance and the skills to be able to deliver the best to the client. The principle of fairness and honesty should definitely be the part of Code of Ethics formed for the employees because in any kind of business relationship, the transparency is very important. The employee should be straightforward and fair and reasonable in every relationship formed in professional life. They should be able to accept the conflict of interest and opinion so that the main issue is not neglected. The strengthened provisions should be made along with the new code of ethics that introduces a new section that states the pressure to adhere to the fundamental principles and the  next provision that states to prepare and present the information professionally. The conceptual framework used describes all financial advisers are required to apply the code so as to comply with the fundamental principle of ethics and be independent wherever it is applicable. 

Conclusion

The conclusion drawn is that the finance advisers must adhere to the Code of Ethics to deliver the recommendations and planning of their finance with high standards of ethics. FASEA (Financial Advice industry in Australia) was established through the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 by the Federal government. It has set various educational, training standards and ethical standard for the financial advisers that holds the license in Australia. 

References

Barry.Nilsson.Lawyers. 2019. Changes to professional standards for financial advisers: The Corporations Amendment (Professional standards of financial advisers) Act 2017. Available at: https://www.bnlaw.com.au/page/Insights/Insurance_Alerts/Professional_Indemnity_

Financial_Lines/Changes_to_professional_standards_for_financial_advisers_

The_Corporations_Amendment_Professional_Standards_of_Financial_Advisers_Act_2017/ [Accessed on: 27 July 2019]

Centre for Financial Planning. 2019. About the Financial Planning Profession. Available at: https://centerforfinancialplanning.org/about-the-center/about-the-financial-planning-profession/ [Accessed on: 27 July 2019]

CPA Australia. 2019. APES 110 Code of Ethics for professional accountants. Available at: https://www.cpaaustralia.com.au/professional-resources/accounting-professional-and-ethical-standards/apes-110-code-of-ethics-for-professional-accountants [Accessed on: 27 July 2019]

CPA Australia. 2019. Professional standards of financial advisers. Available at: https://www.cpaaustralia.com.au/professional-resources/financial-planning/professional-standards [Accessed on: 27 July 2019]

Cull, M. 2009. The rise of the financial planning industry, Australasian Accounting, Business and Finance Journal, 3(1). 

Financial Adviser Standards and Ethics Authority. 2019. Code of Ethics Standard commences 1 January 2020. Available at: https://www.fasea.gov.au/code-of-ethics/ [Accessed on: 27 July 2019]

Financial Planning Standards Board. 2011. Financial Planner Code Of Ethics And Professional Responsibility. Available at: https://www.fpsb.org/wp-content/uploads/2016/01/110000_pub_CodeEthicsProfResp-A4-LR.pdf [Accessed on: 27 July 2019]

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