Factors Contributing to Financial Service Provider Misconduct in Australia

Several factors have contributed to the financial service provider misconduct in the Australian Financial service industry and this has been caused by the organization and employees who ignore their customers’ interests and fail to fulfill their fiduciary duties to those clients. This paper is going to discuss the pension trustee code, organizational behavior and the education of the clients on their rights and the importance of perfect information towards clients and customers. The paper will also discuss the depth that the financial service associations have gone and what needs to be done for these industries to reach the standards required by the government.

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Summary
Several factors have contributed to the financial service provider misconduct in the Australian
Financial service industry and this has been caused by the organization and employees who
ignore their customers’ interests and fail to fulfill their fiduciary duties to those clients. This
paper is going to discuss the pension trustee code, organizational behavior and the education of
the clients on their rights and the importance of perfect information towards clients and
customers. The paper will also discuss the depth that the financial service associations have gone
and what needs to be done for these industries to reach the standards required by the
government.the article in question talks of the factors that have led to misconduct of the service
provider in the Australian Financial sector and the solutions to the misconduct.
Misconduct in the financial systems stems from unethical conduct and also on the absence of
leadership on matters ethical matters. Some firms have engaged in unethical behavior in order to
match with their employees. eg there are firms that have introduced charges on advisers for no
service offered while this has been illegal for a very long time. Some organizational structures
have also been promoting the interests of their employees while overlooking those of their clients
(Michael, 2018, p. 1). Unless there are clear policies put by the different organizations,
misconduct will continue to persist. In some other organizations, the management of financial
services has been reluctant in the implementation of ethical and professional conduct guidelines
and hence overlooking the ethical behavior and the misconduct of the workers (Michael, 2018, p.
1).
The CFA then lays guidelines requiring that the financial services employ standards and
policies that promote ethical behavior in an organization. The CFA codes and standards are
fundamental to the organizations since the codes are essential to their mission of leading an
investment profession around the globe through the provision of the highest standards of ethics
and also promotion of professional excellence for the well-being of the society in which the
organization operates. The code of ethics is made up of six principles which define the expected
codes that CFA expects from its workers (Michael, 2018, p. 2). The principles include integrity,
professionalism, competence in work, rationality when making decisions, the viability in capital

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markets and conflicts of interests. The asset manager code uses these principles at the firm level
to ensure that the ethical practices are adhered to (Michael, 2018, p. 2). The asset manager code
is the starting point for organizations to identify their obligations within the organization.
The CFA has a great experience in working with the global asset management firms to make sure
there is an achievement of a better outcome from the firms (Michael, 2018, p. 2). The CFA
shares insights into the royal commission (Michael, 2018, p. 2). The CFA has also come up with
codes and standards that are supposed to be used by the Australian financial organizations as
discussed below:
Pension trustee code
This code has been used to highlight the imperious for the trustee so as to build a clear mission
and thereafter establish policies that will be the supporting points of this mission (Michael, 2018,
p. 3). The codes require that the trustee meet the obligations of best interests, independence,
scheme mission and competence among others (Michael, 2018, p. 3). Through the adoption of
these codes, the trustees are able to have an established framework of ethics for the government
of the board members for the interests of the pension participants and also the beneficiaries.
To aid people and organizations in terms of the application of the CFA codes, CFA through its
research foundations has been publishing various papers and books so as to inform and guide the
readers on the acceptable social ethics (Michael, 2018, p. 4).
Current Application of Fiduciary Duty in Australia
The role of the investment industry towards the consumers who entrust investment
professionals with their money is fiduciary. Self-regulation and governance are however not
adequate are not adequate to encourage the financial investment and the individuals involved to
carry out this duty. (Michael, 2018, p. 5)Some bankers and other personalities have their own
codes but these codes do not guide ethical behavior an if they do, they are never adequate in
governing the laid down obligations. For instance, the duty of the legislature to act for the
interest of the clients has been a legal law for years. (Michael, 2018, p. 4)However, conflicts of
interest and misconduct have been arising often. The conflicts have been due to the vertical
integration of the large size of the financial services and also the industrial ethics and the
professional conduct guidelines.

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The existing CFA codes, standards and guidelines possess a good benchmark for all financial
institutions and also for the particular individuals for in relation to the expectations which
revolve around professionalism and ethics (Michael, 2018, p. 5). The CFA has had collaboration
with different institutions around the globe since the CFA is aware that misconduct and unethical
behavior cuts across most financial services around the globe. The CFA Institute has in the
recent past collaborated with other financial institutions to make a market research to uncover the
common unethical issues that are evident in the financial investment industry and also to identify
the better sources that could lead to better decision making and more culture (Michael, 2018, p.
5).
Educating Clients on Their Rights
There has been the development of the statement of the investor rights aimed at advising the
buyers of the financial service products concerning what they are expected to get from the
financial service providers (Michael, 2018, p. 6). These are some other fundamental principle
reflectors of the required ethics and conduct that are critical in the achievement of confidence
and trust for the professional leaders and for the good relationship between trustees and the
financial service leaders (Michael, 2018, p. 17).
The Organizational Culture, Governance and Incentives
Adequate Practitioner Training and Qualifications
There is insufficiency in the practitioner training whereby ethics training is in most cases not
there or is not sufficient enough from the professional training whether it is for bankers, fund
managers or the insurance institutions (Michael, 2018, p. 7). The codes of ethics are vital in any
institutions and therefore should be adhered to. Education and professional training are also vital
in the promotion of ethical conduct (Michael, 2018, p. 15).
The vertical integration of financial service firms and the self-driven culture of these
organizations has been the root cause of misalignment of the outcomes caused by the interactions
between the service providers and the consumers (Michael, 2018, p. 14). The latter has been
quite conducive in the provision of services that have been driven by profit inducement rather
than the curiosity of the clients. Code of ethics is important since they would help the

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organization in helping the organizations align with their customers and would motivate the
customers to change their attitudes and personalities towards the services that they receive
(Michael, 2018, p. 8). Adherence to strong ethics would be a solution to serving the consumers’
interests and this will make the society build trust with the financial institutions and this will lead
to the growth of the institutions (Michael, 2018, p. 12).
This article has utilized several concepts as discussed above. The concepts of integrity,
professional competence and professional behavior have been used as the basic principles that
guide code of behavior for the workers. The codes have been used to outline the professional
standards that the workers are expected to possess. It has mostly been used to express the internal
conduct in a business. The code of conduct has been used to clarify the mission of the
organization, its values and principles and also helps the employees to locate relevant documents
within an organization
Critic
However, there is much work that needs to be done by the financial service providers so as to
regain the community trust and competence and for the general macroeconomic policy (Michael,
2018, p. 10).There has not been a fundamental change in the financial organization to cater to the
macroeconomic factors and this has led to the underperformance of the financial service firms.
Macroeconomic policies will be easily achieved if there will be little or no misconduct for the
service providers (Michael, 2018, p. 18). There also needs to be a high level of consideration of
the interests of the consumers.
Conclusion
Consumer behavior and financial service providers keep players in the growth and
development of any economy. Once one of these fails to perform their duties up to the standard
levels, the revenue collection becomes a hard task and the targets for the institutions might not be
achieved. The financial service providers are supposed to implement the code of ethics and
promote the professional standards that will lead to economic prosperity and well-being of the
community members. Provision of information to the clients on the costs of services and fees is
important since their trust in the financial service providers will go up. The CFA should also
increase their services to connect the locals in Australia with the global network investment so as

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to expand the Australian Economy and also educate the public on the importance of local and
international public investment.
References
Michael, F. (2018). The Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry. CFA Soicety of Australia, 1(1), 1-25. https://cfas.org.au/wordy/wp-
content/uploads/2018/08/HayneRoyalCommission_Letter_CFASubmission_FINAL-1.pdf.