Key Points:
1. Changes have been made to the Corporations Act to raise education standards and introduce a code of ethics for financial advisers.
2. Ethical standards for financial advisers are seen as an opportunity for professional recognition.
3. Financial Standard has introduced FS Aspire CPD as a solution for advisers transitioning to new ethics and education requirements.
Important changes have been made to the Corporations Act 2001 to raise the standard of education, training, ethical behaviour and professionalism for financial advisers. Among the changes, from January 2020, it will be mandatory for all financial advisers to comply with a Code of Ethics.
Under the Corporations Act, the Financial Adviser Standards and Ethics Authority (FASEA) is the official standards authority tasked with governing the conduct of professionals in the financial advice sector by establishing mandatory educational and training requirements for all licensed financial advisers. A key part of FASEA's governance role is the formation of a Code of Ethics that all advisers will be required to adhere to from 2020.
This new industry-wide code is seen by many as the first step to professional recognition, in line with long-established professions such as lawyers, accountants and doctors.
"The registering of the Code of Ethics represents a significant milestone in providing a framework to lift the ethical and professional standards of financial advisers," said FASEA chief executive Stephen Glenfield in a February release.
Restoring trust
In the aftermath of the 2018 Royal Commission, and the unprecedented scrutiny of the financial services industry holistically, it is particularly opportune that FASEA's new education and ethical standards for Australian financial advisers have now come into play. This is a key step in better aligning improved professional and ethical standards with heightened community expectations. The new standards are an important part of a reform program that is intended to restore trust and confidence in the financial sector.
The first of the new FASEA standards to take effect—from 1 January this year—is in relation to continuing professional development (CPD) requirements. Recent amendments to the Corporations Act require that all licensed advisers are required to meet the requirements for continuing professional development set by FASEA.
"Advisers must now complete 40 CPD learning hours annually. Nine of those hours, as required by FASEA, must be activities designed to enhance participants' capacity to act as an ethical professional," says Giovanni Munoz, director of technical services at Financial Standard.
As expected, these changes were initially met with trepidation by the adviser community. In a recent Financial Standard poll, 58% of advisers disagreed that the FASEA recommendations were fair and reasonable, but Munoz indicates that many practitioners should see an opportunity in setting a transparent ethical benchmark.
"Although there have been attempts in the past to create an industry-wide code of ethics, this year will the first time that ethics will form a compulsory component of CPD, and January 2020 will be the first time that all Australian advisers will be held to a unified ethical standard," stated Munoz
"Ethics is an assumed requirement for those in the business of giving legal, medical and accounting advice. While it will be a difficult transition for many advice practices, especially given the tight deadlines set by FASEA, it is seen as a necessary step in order for the industry to align with the standards of other professions."
In 'The Future of Trust' report released by the Chartered Accountants of Australia and New Zealand in February this year, 1000 respondents stated that doctors, accountants and lawyers were the first, fourth and sixth most trusted professions respectively. Of the respondents, 32% said that their trust in the financial services industry had declined in the last 12 months.
FASEA states, "Collectively, financial advisers are members of Australia's newest profession. As such, while they formerly provided a commercial service, they should be committed to offering a professional service—informed by a code of ethics intended to shape every aspect of their professional conduct."
With the aim of helping advisers transition to these new education and training standards, Financial Standard has recently released a new CPD platform, FS Aspire CPD. The platform's reporting functionality is now aligned with the newly-launched FASEA CPD categories, offering over 90 hours of quality content that is dedicated to ethics, professionalism and many other pertinent topics for advisers.
