“Listen boy
It’s good information from a man
Who’s made mistakes
Just a word or two that [they] get from you
Could be the difference that it makes”
— Billy Joel, “Tell her about it”
What’s the harm of an extra word or two?
When you compare the Values relating to the Code of Ethics enshrined in the Legislation to the Values included in FASEA guidance, it is curious that:
- the guidance feels a need to provide an extra 570 words to restate the five values underpinning the twelve standards; and
- FASEA felt a need to change/restate or delete certain words.
The Corporations Act, states at s921E: A relevant provider must comply with the Code of Ethics.
This has translated nicely to the FASEA Legislation and the preamble, which states that:
You must always act in a way that demonstrates, realises and promotes the following values.
(a) Trustworthiness
(b) Competence;
(c) Honesty;
(d) Fairness; and
(e) Diligence.
The FASEA guidance at FG002 seems to soften the language and states:
The Code requires financial advisers to act in a way that demonstrates, realises and promotes the following five values:
(a) Trustworthiness;
(b) Competence;
(c) Honesty;
(d) Fairness; and
(e) Diligence.
De-emphasising MUST
The Oxford Dictionary defines “must” as “used to say that something is necessary or very important (sometimes involving a rule or a law)”. In contrast, “requires” is defined as “to need something; to depend on somebody/something”.
Why de-emphasis the call to action from “you must” to “the code requires”.
Will “must” creep back into guidance when there is a greater confidence, and the establishment of the monitoring body?
If the law sets the minimum standard of behaviour and we take the view that Ethics sets the maximum standard of behaviour. In this instance, we seem to have the law setting a higher standard at s921E than the supporting guidance at RG002.
Let’s examine each value in turn, and highlight the discrepancies, additions and curious turns.
Other curious departures
Let’s examine each value in turn, and highlight the discrepancies, additions and curious turns.
Trustworthiness
There seems to be extra information added, when this value is re-stated in the guidance. The information relates to protection of privacy and acting in the client’s bests interests.
The sentence which seems to have diverged when being restated in the guidance relates to:
In the Legislation
Acting ethically, with trustworthiness, promotes trust in the profession of financial advice by consumers, enabling the community to feel confidence in accessing and utilising professional financial services
In the FASEA Guidance
Acting ethically, with trustworthiness, promotes trust by consumers in the profession of financial advisers, promoting community confidence in accessing and utilising professional financial services.
It feels like the emphasis has been placed on the consumer in the guidance, rather than the promotion of trust in the profession of financial advice.
Competence
In relation to competence, the legislation ends with stating the duty of competence is ultimately personal and cannot be outsourced to others. While the legislation ends at this point, the guidance continues and suggest that if you don’t possess the particular competencies required to assist your client, in accordance with other ethical requirements in the Code, you must refer your client to another professional.
Which of course makes sense, referrals to those with the correct subject matter expertise, is an important aspect of acting in your client’s best interest.
Curious the legislation did not provision for this scenario.
The guidance goes on to request a commitment to life-long development and maintenance of knowledge, skills and expertise at a level of currency and to self-reflect and exercise professional judgement to determine when to augment your knowledge, skills and experience.
Again, curious the legislation did not provision for the maintenance of competence.
Honesty
Of all the variances, this one seems very strange.
In the Legislation
Acting to demonstrate, realise and promote the value of honesty requires that you conduct yourself with complete integrity in all your professional dealings with your clients and with all others that you engage with in a professional setting
In the FASEA Guidance
Acting to demonstrate, realise and promote the value of honesty requires that you conduct yourself with (the word complete deleted) integrity in all your professional dealings with your clients and with all others that you engage with in the professional setting.
If Guidance is about expanding and explaining the legislation, then dropping the word “complete” seems to be a strange omission. The guidance does elaborate and confirm that honesty is more than just technically telling the truth, and that it may require you not to withhold information from your client that your client would want to know.
Fairness
This particular value seems to have travelled from the legislation to the guidance, relatively intact.
However extra guidance is provided in relation to competency and extends the idea to ask advisers to self-reflect on their competency as well as their capacity to deliver or access the necessary professional services required in the engagement in a manner that benefits their clients.
The guidance also introduces the idea of an objective assessment of your and advisers’ services and whether they can bring value to their client.
It also discusses personal biases, and how to act to mitigate the threat of your own biases, or your client’s unconscious biases to your client’s decision making.
Diligence
In this last value, we see a re-stating of the legislation in the guidance, and further direction in relation to particular client interactions as they relate to engagement, diagnosis etc.
Why this matters
This matters because as a profession we are responsible for monitoring adherence to the Code in the absence of the monitoring body.
To this end, guidance should help us ascertain if we are adhering to the Code. Guidance becomes unhelpful where material aspects are lost in translation from the Corporations Act, to the FASEA legislation, to the FASEA guidance.
You only need to pick up a court transcript, to see words are poured over and forensically analysed. Interpretation of the legislation, the words, the actions and especially the context, all matter. Particularly as we are in a state of transition with the Code, and Licensees are required to supervise adherence to the Code until the establishment of a monitoring body.
In a previous article “Mere prattle without practice: Why the FASEA Code fails”, we have discussed the issues with the Values and Statements included in FG002.
Adding an extra 570 words, and at the same time deleting, what in our opinion, are materially significant words (i.e. “must” and “complete”) seem on face value, to have lessened the standard of behaviour when expressed in guidance.
