Working group outlines new code's principles

Investment advisers look unlikely to need to meet higher competence standards under the new code of conduct for the industry.

Friday, December 1st 2017, 6:00AM

by Susan Edmunds

A working group is developing the new code, which will come into force as part of the implementation of the Financial Services Legislation Amendment Bill.

The group has issued a blog about the draft principles it is working with, after its initial round of consultation with focus groups.

The code will be especially important under the new regime because it will be the document that tailors the wider rules to each individual subset of advisers.

It said the focus group discussions considered how the code should differentiate between different types of advice when it was setting standards for particular competence, knowledge and skills.

At the moment, the code only applies to AFAs and sets a level five certificate minimum qualification.

That would have to change when insurance and mortgage advisers were covered too, the group said.

"There will need to be more than one particular competence, knowledge and skills requirement. A range of factors will affect the degree of discretion and expertise exercised by the individual adviser: for example the business model, advice scope, client risk, and nature of product."

It had been suggested that the new code might include a higher competence requirement for investment advisers - potentially a degree.

But the working group said in the case of financial advice that included designing an investment plan, the focus groups talked to did not raise any concerns about the appropriateness of current standards continuing.

“We continue to work on our approach to competence, knowledge and skills, and will consult on it further in our first consultation paper.”

Among the other general principles for the new code are that it will focus on good advice outcomes for retail clients, and put clients at its heart.

“We emphasise the 'advice' outcome to distinguish it from the “ultimate” financial outcome of a particular product or plan. The code is about achieving a good outcome from the advice process, not necessarily obtaining a favourable return.”

It will be based on the assumption that clients have basic knowledge but not as much as a financial adviser, will be drafted with a principles-based approach that allows for flexible application and will promote good advice no matter how that advice is delivered. The code’s ethical behaviour standards will be consistent for all advice situations, and are relevant to the advice business, its officers and advisers.

You can read the full blog here.

Tags: AFA Code Working Group conduct financial advisers Financial Services Legislation Amendment Bill Insurance Advisers investment Mortgage Advisers qualifications

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