Over the past five to ten years, the financial planning industry has experienced significant changes - particularly after the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in February 2019.
In a bid to restore confidence in the financial planning profession, the Government introduced the Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics on 1 January 2020.
This new Code is a set of principles and core values designed to raise the standards of professional and ethical behaviour within the industry. The Code will also raise the education, training and ethical standards of licensed financial advisers, so they can improve engagement and enhance the experience, understanding and financial capability of clients.
FASEA chief executive Stephen Glenfield said “It’s a code about lifting standards, ethical behaviour and professionalism. It’s asking advisers to put the interests of their clients first at all times, which is the hallmark of any profession.”
The principles-based model is underpinned by five values advisers need to demonstrate and promote. These include trustworthiness, competence, honesty, fairness and diligence. They’re also required to abide by the 12 Standards of the Code – for example ethical behaviour, client care and professional commitment. These principles are to be used in combination to strengthen and inspire the best outcome for consumers and the broader community.
The educational standards established by the Code (which are due to come into full effect on 1 January 2024) will provide clients and the broader community with the comfort of knowing that all financial planners and advisers are appropriately qualified. Before the establishment of the Code, qualifications were disparate and there was no way to determine if your adviser was appropriately qualified.
The Code will also impose a comprehensive review of the motives and business models of the industry’s participants. Those who are unwilling to change their thinking and behaviours will fail, while those who embrace the Code’s spirit of goodwill and public interest will have a positive and rewarding role in the industry.
Ultimately, strengthening the financial planning and advice sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions.
Although relatively new, research conducted by CoreData during the period from October to December 2019, showed consumers seem positive about a Code of Ethics for the industry. In fact, trust in financial advice improved marginally, with a result of 42.4%, which was up from 41.3% in the period from July to September 2019.
The same survey also asked respondents what they thought of the new Code of Ethics. Over 85% said they didn’t know their advisers were legally required to comply with an industry-wide Code of Ethics. However, more than half (55.2%) said they would trust advisers somewhat or significantly more if they were to comply with the Code.
The Code impacts all Australian financial planners and advisers – whether they’ve been in the industry for years or are just starting out.
From an education perspective, advisers who were practising before 1 January 2019 need to obtain the approved qualifications of the Code by January 2024. Advisers who started after 1 January 2019, also need to complete the approved qualifications, but they are also required to work under the supervision of a senior adviser for one year before they can start advising clients directly.
The facilitation of higher education and training is a journey all financial planners and advisers are undertaking, but the rewards will be worth the effort, especially if there’s an increase in public trust and confidence in the industry.
From an ethical perspective, as a fund, the values and ethical standards EISS Super holds all our employees to are aligned with those included in the Code. Our members and clients come first, all our employees, including our CEO and Financial Planners receive a salary only and do not pay or receive any commissions. This approach ensures that what’s right for you is also what’s right for your EISS Super Financial Planner.
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