Ethics in Financial Advice Assignment - Semester 1, 2020, Finance

This assignment delves into the ethical considerations within financial advice, analyzing a case study involving a financial advisor named Jamie and her client, Nathan. The assignment explores the concept of unconscious biases and how they can impact decision-making, referencing the FASEA Code of Ethics to evaluate Jamie's actions. It examines specific standards and values, such as integrity, fairness, and trustworthiness, to assess Jamie's adherence to ethical guidelines. The assignment also addresses potential ethical issues, including partisanship and rationalization, and recommends ethical frameworks, such as the duty framework, to guide decision-making. Furthermore, it discusses the importance of informed consent and provides recommendations for conducting effective fact-finding to ensure ethical and client-focused financial advice. The student's work provides a comprehensive overview of ethical challenges in financial planning and offers practical solutions to navigate complex situations.

Ethics in Financial Advice
2/18/2020
Student’s Name

Ethics in financial advice 1
Contents
Question 1 (a)..................................................................................................................................2
Question 1 (b) (i).............................................................................................................................2
Question 1 (b) (ii)............................................................................................................................3
Question 1 (C)..................................................................................................................................4
Question 2 (a) (i)..............................................................................................................................5
Question 2 (a) (ii).............................................................................................................................5
Question 2 (a) (iii)...........................................................................................................................6
Question 2 (a) (iv)............................................................................................................................6
Question 2 (b)..................................................................................................................................7
Question 2 (c)..................................................................................................................................8
Question 3 (a)..................................................................................................................................9
Question 3 (b)................................................................................................................................10
Question 3 (c)................................................................................................................................11
Question 4 (a)................................................................................................................................12
Question 4 (b)................................................................................................................................13
Reference.......................................................................................................................................15

Ethics in financial advice 2
Question 1 (a)
Unconscious biases can be understood as social stereotypes that a person creates an about certain
group of individuals due to own conscious awareness (Navarro, 2020). People make these biases
based on their cultural norms, life experiences, and the environment they are surrounded by
(onepath.com.au, 2019). Here in the given case, Jamie has briefed her plan regarding the
proposed meeting with Nathan. By this plan, it is reflected that she has assumed many things by
her such as Nathan would be a well-informed investment in general. Further, she believed that
Nathan is a good student and therefore she is not required to go into more detail regarding the
facts of the case. She also assumed that Nathan’s grandparents may not be happy about changes
in the investment mix. These assumptions are likely to prevent her from taking an appropriate
and ethical decision regarding the investment of Nathan. She has created a social stereotype
about Nathan where she considers him as a good student having enough knowledge about
investment. These biases are likely to influence the perception and behavior of Jamie.
She may think that whatever advice she is giving, she is acting ethical and unbiased but the same
is not true. Her perception would prevent her from making proper investigations into facts and in
this manner, she would give advice that may not be in the best interest of Nathan, for instance,
she may skip sharing some basic details about investment believing that Nathan is already aware
of the same. However, the real situation may be different which can bring adverse consequences
to Nathan even when Jamie does not have any wrongful intention in the whole matter.

Ethics in financial advice 3
Question 1 (b) (i)
FASEA Code of Ethics acts as a guide to financial planning professionals that helps them to
make an ethical and professional judgment. Total 12 standards are there which focus on different
aspects (Charteredaccountantsanz.com, 2020). Standard 1 demands every adviser to work
according to the applicable law in addition to this code and must try to avoid their intent.
Similarly, standard 2 states that a financial planner must act with integrity and his/her advice
must be in the best interest of the client (riskinfo.com.au, 2019). Here Jamie was aware of her
responsibility of working in the best interest of Nathan, yet she has not paid enough attention to
his situation. She seems to fulfill her obligation under standard 1 as she is not avoiding
compliance of any law deliberately but does not seems to comply with standard 2 where she
would fail to provide the advice in the best interest of Nathan. According to standard 2 integrity
refers to frankness and openness in all dealings so that the best advice may give. Further, it also
states that the adviser must identify all the gaps in the information and conduct a reasonable
investigation of the case.
As given in the case study, Jamie understands that she would have to collect a lot of information
and therefore she needs to make everything clear to Nathan despite the current understanding or
knowledge of Nathan. She would not make enough inquiry in the matter and this manner will
suggest those recommendations, which would not fulfill Nathan’s purpose. Here it is clear that
Jamie is not likely to comply with the standard 2.
Question 1 (b) (ii)
FASEA Code of Ethics also outlines some of the values that further describe the element that
should be there in the behavior of financial advisers. One such value is fairness that demands

Ethics in financial advice 4
advisers to behave professionally. This value further states that a financial adviser must
investigate and evaluate a client’s needs (fpa.com.au, 2019a, P 8). In the given case, Jamie is not
up to making proper investigation about the situation of Nathan, as she is required to do for
checking the exact need of him. In this manner, this is to state that Jamie is not likely to comply
with the value of fairness.
Question 1 (C)
After the above-mentioned discussion, it is far clear that Jamie is not able to understand how
important it is to make an appropriate investigation in the matter of facts of the case and how to
do the same. Jamie needs to check each aspect of Nathan to understand his requirements as per
the principles of standards 1 and 2 as well as the value of fairness. There is much advice-giving
to Jamie for conducting the subjective meeting with Nathan and provide some other acts to do in
addition to what she has decided. The very first recommendation to make is regarding
unconscious bias. Jamie needs to set aside these biases and assumptions. She needs to discuss
everything with Nathan in a clear manner considering her expertise on the subject. It means
regarding any of the aspects or point, she should not believe that Nathan might be aware of the
same. Since it is going to be the first meeting of Jamie with Nathan, “getting to know the client”
should be the purpose. In other words to say that she is required to know the real needs of
Nathan. She needs to prepare the list of certain documents to ask Nathan as well as some 6-7
basic questions that can highlight his expectations from this financial planning process.
She should communicate in a way that can build trust so that Nathan may discuss his plans about
trust money as well as about insurance. Listening is another important that should be taken care
of by Jamie. She is required to listen to Nathan carefully and also to make a cross-question in

Ethics in financial advice 5
case of any confusion. As an adviser, she also needs to know that her whole focus should remain
on the client. As demanded in standard 2, Jamie needs to ensure that she is open and honest in
her first meeting. Further in conjunction with this, considering the value of fairness also Jamie
needs to investigate and evaluate Nathan’s need following her professional competency. She
needs to ask for areas where Nathan may have specific concerns. This is required to do to check
those areas, which would require additional attention. By following the above-mentioned advice,
an effective initial fact-finding may be conducted with Nathan.
Question 2 (a) (i)
Trustworthiness is another important value that should be followed by professional advisers.
This value demands professionals to act in good faith while dealing with others. Here the other
party is the grandparents of Nathan. They want to give their trust money to their grandchildren
and are not even aware of the fact that Nathan’s parents have been bankrupt. Here in this
situation, one of the great ethical issues that Jamie is likely to face is that receiving funds in
parents' accounts so that Nathan’s current youth allowance would not be affected is not an ethical
thing to do. It would not only allow Nathan to take youth allowance even after seizing of his
entitlement but also would create an unfair situation for the grandparents as well as for the
provider of allowance.
Question 2 (a) (ii)
Different concerns remain exit for a financial adviser where partisan is one of them. It can be
defined as an act that shows favoritism or support towards a specific person, party or cause
(adviserbusinessreview.com, 2020). To counsel the client correctly, it is required for financial
advisers to avoid partisanship (Ornani, 2019). The topic is important to discuss here, as the same

Ethics in financial advice 6
becomes a barrier for financial advisers and prevents them from making ethical decisions. When
advisers need to take favor of one party, they have to set aside their reasoning concerning right or
wrong and they decide in favor of that party without applying their professional knowledge. In
the given case also, If Jamie would only think of Nathan pursuing partisan then she would be
able to make an ethical decision, as she would have to set aside the interest of other parties.
Question 2 (a) (iii)
To mention the definition of rationalization, this is to state that as per the lexicon dictionary it
refers to an action of being calculative or an action to justify a behavior even when the same is
not appropriate. In other words, this can be understood that rationalization is nothing but are
invented explanation that denies or hides true motivation (Ethicsunwrapped.utexas.edu, 2020).
These reflect excuses, which people give to themselves for not following ethics or taking
unethical decisions. A range of categories of rationalization has been presented by Anand,
Ashforth, and Joshi. One such type of rationalization is an appeal to higher loyalties. Here, in this
case, a person argues that some ethics need to breach to meet more important goals. In the given
case also, this type of rationalization may influence the ethical decision of Nathan. Probably his
main motive is to receive funds of his grandparents in his parent’s account but he is presenting
this as an act that he has to do the cause of meeting higher goals i.e. receiving youth allowance.
In this manner, rationalization may affect Nathan’s ethical decision-making.
Question 2 (a) (iv)
Different ethical frameworks are there which provide a different way to decide a matter at the
part of a financial adviser. Mainly three types of ethical frameworks are there namely the
consequentialist framework, duty framework, and virtue framework. All the frameworks focus

Ethics in financial advice 7
on different factors and help a financial adviser in reaching up to an ethical conclusion. Here
considering the facts of the case and situation of the parties, the duty framework is suggested to
Jamie. As the name implies, this framework states that one should focus on the duty arise from a
particular situation. Irrespective of the consequences or virtues involved in a situation, a
professional should follow his/her duty. Here it becomes the duty of Jamie to provide fair advice
to Nathan and in this way, she would not look after the consequences. Complying with this
framework, Jamie is likely to prevent Nathan from receiving funds in his parent's account. By doing
this, Jamie would also be able to manage a moral outcome as well as keeping her virtues save. It means
in the given situation, following duty ethics itself will lead to compliance with the other two frameworks.
Question 2 (b)
As mentioned above, a total of 12 standards is there in the FASEA code of ethics. Each standard
has its own significance. Here to state that standard 4 of the code demands that every financial
adviser should act for a client with the client's prior, free and informed consent. It means before
providing the services, one should explain to the client what services will be provided, on what
terms they will be provided, privacy and confidentiality agreement and others. Informed consent
refers to the one where the client understands all the agreements and becomes agree for the same.
Here the professional is required to have a reasonable ground to the belief that the same has
taken informed consent of the client before moving towards the execution of a course of action.
The respected code of conduct outlines these reasonable grounds. First, the professional should
ensure that the same discussed the client. Further, one should develop relevant documents and
evidence to show that the same has informed every related aspect to the client. Such documents

Ethics in financial advice 8
include advice arrangement and consent letters (fpa.com.au, 2019b, P 24). One may also include
an example to ensure the existence of informed consent.
Standard 7 is also related to the informed consent of the client. According to this standard, a
client must be aware of all the benefits and fees that he/she provides to professionals to the
services and must provide informed consent. Standard 7 is focused on the remuneration of
professionals and believes that the same must be informed to the client and the client should
approve the same. Similar to standard 4, standard 7 also demands a professional to collect related
documents and evidence.
Now, moving towards the case scenario, this is to state that if Jamie has provided some advice
and Nathan ha accepted the same, then the information of this consent can be ensured in various
ways. Firstly, Jamie has a full questionnaire filled by Nathan which is a suitable document for
the purpose of reasonably believe the test. In addition to the same, Jamie can also prepare an
advisory arrangement making the consequences of advice clear and can get the same signed from
Nathan. By doing the same she will be able to demonstrate that she has taken informed consent
of Nathan and implemented the advice.
Question 2 (c)
This is another important standard outlined by the code. According to the same, a professional
adviser should consider the broader interest of the client. In other words, this is to state that this
standard clearly demands professionals to consider the broad effect of the client working on
professional’s advice. These effects do not only include an effect on the client. This can be
understood with the help of an example. For instance, the advice of a professional may not affect
the client but can affect family members of him/her. Nevertheless, the professionals are not

Ethics in financial advice 9
required to act in the best interest of the family members if these people are not the client. In this
manner, this standard requires professionals to take a long term and broader interest and similar
circumstances of the client into account.
Applying this standard into practice for the given scenario, this is to state that being a
professional adviser, Jamie has obligation to ask about the implication of her investment advice
to Nathan as well as to his family members. She must ask about the results of this financial
advice to the life of Nathan's family members, as she was aware of the fact that Nathan’s parents
are already bankrupt. In conjunction with this, Jamie is liable to check whether her advice is
likely to lead any social security consequences on Nathan or any family member. Conclusively
to state that it would be wrong to mention that the obligation of Jamie is limited up to questions
asked by her to providing investment advice.
Question 3 (a)
In general, while providing financial advice to parties, professionals face many incidents of
conflict of interest. To manage such circumstances, standard 3 of the FASEA code is given. This
standard summarizes that a financial adviser must not refer, advise or act anything where the
same has some type of conflict of interest (Kehoe and Vickovich, 2020). The standard states that
it is the ethical duty of financial adviser to inform such conflict of interest to client if there is any
and not to act further for him/her. If a financial adviser wants then the same may refer the client
to another professional but should not receive any consideration in the form of commission or
otherwise for such referral. A professional may not relieve from the obligation under this
standard by simply informing the client about the advantage one is likely to receive.

Ethics in financial advice 10
According to this standard, a conflict of interest seems to be there in some of the situations. For
instance, if there is a conflict in duty owed to different clients or conflict between the type of
advice need by the client and the one which can be provided by the professional. The standard
also outlines an example of conflicts that would not meet this standard. Jamie in a situation is
likely to answer that the subjective referral arrangement is compliant with this standard. Here
Jamie considering provisions of the respected standard, Jamie needs to make it clear that the firm
is receiving no benefit out of such referral and therefore the same is acting within the boundary
of standard 3. There is no case of conflict of interest and whatever referral is being made, the
firm does not have any financial interest in general. Jamie should first outline the requirements of
the standard to let the other know that she understood the law properly and then should provide
the reasoning stated above.
Question 3 (b)
Standard 5 of the act states that it becomes the duty of financial advisers to ensure that all
financial products and recommendations provided to the client are in the best interest of the same
and is appropriate to his/her circumstances (fasea.gov.au, 2020). A financial advisor needs to
ensure that his/her client understands each aspect related to the case such as the cost involved in
the process, benefits and risk related to financial products recommended by the adviser. Here
Jamie has a clear answer to the question where she has been asked the manner in which referral
arrangement can be used complying with standard 5 of code of conduct. Jamie should submit
that by informing the client about the cost involved in the process, the reason behind referral and
proposed benefits, an adviser may ensure that the client understands everything about the
recommendations.

Ethics in financial advice 11
In addition to this, standard 5 may be complied with by ensuring the best interest of the client.
An adviser is required to check the importance behind referral and is likely to outline the same to
the client. A document containing the current status of client, long term needs of him/her and
future circumstances can be prepare. The further advisers should detail that how the advice under
referral arrangement may meet the requirements of the client and what would be the position of
the client in case the same reject to follow the advice of referred professional.
Question 3 (c)
To demonstrate the value of competence, an adviser is required to have knowledge and expertise
of the subject to perform his/her professional obligation. The value of competence is one of the
values outlined under the subject code of ethics. This value is client-focused and demands that
every adviser needs to assess the professional services considering individual circumstances,
needs, and preferences of the clients. This duty is personal in nature and cannot be outsourced to
any other professional.
Standard 9 of the code states that a financial adviser must offer and recommend all the products
and advice in good faith and with competence and the process must be free from deceptive or
misleading content (fpa.com.au, 2019d, P 39). Apart from every other thing, the adviser needs to
act honestly and fairly. This standard also prescribes the manner in which a financial adviser can
ensure and demonstrate that they are acting in good faith. Jamie can use these steps to
demonstrate that her action complied with the value of competency and standard 9. She can
demonstrate by ensuring that all the information related to Nathan has correctly been mentioned
in her documents as per the best of her knowledge. Further, she has to ensure that her
documentation related to Nathan does not contain any misstatement or is not misleading in any