JD: Hello and welcome to mind your own retirement, the podcast from YourLifeChoices website and enewsletter, and on today’s show we’re speaking money, but not our normal spin on money.
We’re speaking with the CEO of the Standards and Ethics Authority. So that’s going to be interesting, making sure some ethics in money spending, talking health with Dr. Janette Young from the University of South Australia – how pets can help us in our health.
And also speaking with Kaye Fallick, who just happens to be across from me, the publisher of YourLifeChoices magazine, about respect for the elderly.
So it’s a very good chat.
KF: That’s me John. I’m wanting more respect. So I’m going to tell you how.
JD: Well, I’m going to give you some respect. But first up, let’s go to Steven Glenfield.
He is the CEO of FASEA, which is the Financial Advisors Standards and Ethics Authority. It sounds a very dry business to be in, Steven, but it’s a very important one, sir. Hello and welcome to mind your own retirement.
S: Thank you, John. Pleased to be here. Hi Kaye as well. And it’s a bit dry, but it is important.
KF: Hello, Steven. We’re delighted we’ve finally got you on this program. And I guess the best starting point is for you to tell us why FASEA was established.
S: So FASEA is established by parliament through the corporations act, it came about from a number of inquiries that have been held over recent years into financial advice and financial services. And what needs to be done to give consumers more confidence about taking advice and to be getting better advice. And as part of that was a recognition that the standards in financial advice needed to be lifted more away from an industry into a profession. And as part of that, the Corporations Act has been amended to bring in a series of requirements for advisers that will lift their standards in terms of education, training and importantly, ethical standards.
As part of doing that the parliament, by putting out amendments to the Corporations Act to bring FASEA into play so that we’re actually the regulator that sets the standards for advisers going forward.
KF: So that’s a huge role given the information that came out of the Financial Services Royal Commission recently.
S: It is a really important role, and I guess that’s part of the reason why I joined FASEA from my previous place of work. I think there’s a real opportunity, given what we’ve heard, to actually stand back and look at a long term picture over what does quality financial advice look like and what does a good financial advice profession look like.
JD: Steven, what about those standards? How has it made it safer for retirees to use a financial planner?
S: What I think it does for you, if you look at today and you think – I want to go to a financial adviser, the question I always hear from people is, do you know a good one?
JD: Yes, yes, yes.
S: Who should I go and see? Because I actually don’t know much about them or their background. Whereas once this legislative change takes place, and the transition period for existing advisers takes place. What you’ll know is that each adviser, regardless of who they are, will have moved to having a bachelor level or higher degree or equivalent qualification.
So at present there’s no specified minimum qualification as you would expect to see, say in, medicine, law or accounting or any of the other professions. There is no minimum here, but they will have in the future that minimum level of education before they come in. And they have to pass an exam that we set, which is a practical exam to show that they actually understand what they are doing. And then importantly, on top of that, they must comply with a legislative code of ethics which governs their behavior and requires them to act and always put the client’s interests first.
JD: Okay. A friend of mine has recently separated and she was asking if I know a good financial adviser, where she should put her money. And mate, I was not going to say, I said, ”hey, I’m not going to get involved in this. You know, you need to go find someone of your own.” Because you feel so responsible in case they’re dodgy or whatever.
S: And I think that’s a very fair statement to make. And I think that’s a position a lot of people find themselves in now. What you’ll find once these changes have gone through is whilst you’ll still be asking the question and there is always a trust element of is that a good adviser or not? At least you will have the confidence that – there is a base level of education, there is a base level of training, there is a base level of understanding of ethics, and a requirement to keep your standards up high that you would see in other professions.
And so to an extent, it’s a forward look at bringing advisers into a professional space for the future, in dealing with clients.
KF: So that’s understandable and obviously really important. Steven, I’m always the one who asks the unpopular questions. So here it comes. We’ve heard for so long about putting the customer’s interests first and it just doesn’t seem to happen.
S: Yeah, I know. I think that we’ve all seen examples in the recent inquiries of that taking place. Important thing today, as of first of January this year, is just put into play a code of ethics for all advisers. And it’s a legal code. And that code provides that one of the standards is the advisers must act in the best interest of the client. It also has standards around not acting if the adviser is conflicted. So, these are, I think, important steps forward in terms of – it’s now not a best endeavors thing this is a legal requirement that you must behave in this fashion.
KF: So someone could be charged if they were found to not have done that, because that is a difference. That is a point of difference.
S: Correct. So that actually ASIC and AFCA would both have powers over taking action for someone who doesn’t comply with the code of ethics, because the code of ethics is now part of the corporations law.
KF: Okay. So things do appear to be moving in the right direction. So, our point of view as a website, Steven, is that people do need financial advice because the investment for retirement is a super complex process. Is that what you would say also?
S: Absolutely. I mean, that’s part of the drive of FASEA and part of the drive why I joined. If you think about just even superannuation retirement money now and you think about someone who’s been in that system all the way through – how big those balances are becoming over time. And it’s really important people get financial advice that they can trust going forward. FASEA is not the full answer to everything that happens.
But it provides, I think, the base to give people the confidence that the people they are dealing with have at least got the required education, they’ve demonstrated their skill set through sitting an exam that we set, and they’re subject to ongoing ethical requirements. Which to me is a positive move forward, given how important it is that people get good advice.
KF: So there’s a real lifting in standards. Is there any website or support organisation? And I know we’ve seen quite a lot of organisations come and go over the years. But if people are worried about advice they are receiving, is there one place they can go?
S: For an individual consumer. If you’re thinking your adviser has not done the right thing, I’d suggest that AFCA is probably the first port of call for them.
JD: Which is?
S: Which is the Financial Complaints Authority. It’s a government organization, so it would be: www.afca.org.au
KF: A F for freddy, C A
S: Yeah, alternatively ASIC is another port of call that they could go through.
S: Or, the particular adviser that they’re using will be part of a licensee. So if you’ve got issues with an individual license advisor, you can also go through the licensee.
JD: Has the legislation gone through Stephen, as far as qualification minimums?
S: It has, it’s in place now.
So existing advisers have a transition period out to 2024 to reach that minimum education standard and they have until the end of 2021 to pass the exam that FASEA is setting. There are already 10,000 either enrolled or already completed the exam. There’s already over 7,500 completed the exam. And there are really strong numbers of advisors actually enrolling in education courses to lift their standards which, from a FASEA viewpoint, is really pleasing.
JD: And folks, don’t be frightened to ask, if you are going to a financial adviser, if those qualifications have been met.
S: You should certainly ask how they are going.
KF: Fantastic. I’ve learned a lot and I appreciate you giving us that framework on behalf of our members. So thank you very much, Steven.
S: Thank you for asking me along.
JD: Stephen Glenfield, the CEO of FASEA, which is the Financial Advisor Standards and Ethics Authority, more information on the YourLifeChoices website. And we’re coming back with health after this.