University Assignment: FASEA Code of Ethics Literature Review

This literature review examines the FASEA Code of Ethics, focusing on Standard 2 (integrity and best interest duty) and Standard 3 (managing conflicts of interest). It analyzes several articles and case studies, including the Hayne Royal Commission report, to understand the evolution of financial advice quality in Australia. The review highlights deficiencies in the financial sector, such as poor quality advice, and explores the regulatory responses, including FASEA's code, aimed at improving financial planning practices and protecting clients. The review discusses the implications of best interest duties, the challenges in defining and applying them, and the impact of business models on client outcomes. It also considers the historical context of financial advice, the role of financial literacy, and the importance of ethical considerations in the financial services industry. The analysis covers topics such as the Storm Financial collapse, the role of disclosure, and the importance of considering clients' risk tolerance and financial circumstances.

Running Head: FASEA CODE OF ETHICS
FASEA CODE OF ETHICS
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Literature Review.......................................................................................................................1
Article 1: Lesson about Best Interest Duty............................................................................1
Article 2: The Hayne Royal Commission and Financial Sector Misbehaviour-....................2
Article 3: Advice, investment and superannuation in a brave new world.............................4
Article 4: Best Interest Duties of Financial Advisers.............................................................5
Article 5: Conceptualising Financial Advice in Australia:....................................................6
References:.................................................................................................................................9

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Introduction
FASEA code of ethics discusses about various codes of ethics that a financial adviser should
always follow and adhere to while consulting a client. The two most important codes or
standards for this assignment are standard 2 and standard 3. Standard 2 talks about the act of
integrity. According to this standard an adviser should always act in the best interest of the
client. Standard 3 is about ensuring that there is zero conflict of interest while advising the
client. It allows the adviser to consult his peer professionals in case of any conflict or
confusion. The study aims at analysing some past evidences and case studies to synthesize
new knowledge
Evidences
The case studies below covers the two standards of FASEA code of ethics, best interest duty
and conflict of interest.
According to Bruhn and Miller an individual faces a variety of financial and non-
financial risks in his entire lifetime and might look forward to some financial advice and
guidance. Regulatory frameworks and proposals have defined some centred codes that
defines a good or poor quality advice (Bruhn & Miller, 2014). The code defines that the
advice should be in the best interest of the client and the adviser should follow ethical steps.
This article aimed at highlighting features that were considered as examples of poor quality
advice and needs to be eliminated (Bruhn & Miller, 2014). The study uses primary research
such as interviews and surveys with the financial advisers and investors in order to offer
bounds on what represents the quality of an advice and what factors are to be considered at
the time of advising or suggestions to the client.
The study starts with describing various financial provisions in Australia such as a
system of pillars consisting of 3 pillars one, age pension followed by the second pillar

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defining retirement savings and the third pillar determining the private savings (Bruhn &
Miller, 2014). The provision discusses about the complexity faces and the choices that are
made both by the advisers and the investors. According to ASIC, financial literacy can be
defined as the act of making informed judgements in order to take effective management
decisions. The paper then discusses about the two types of advice such as professional advice
and non-professional advice and their roles. It focuses on the consequences that will arise
from the advice, determining the long term implications and outcomes of the decision and
evaluating the risk are the two factors that defines the quality of the advice to be good or bad
(Bruhn & Miller, 2014). In defining the best interest duty the adviser should focus on three
major factors one, understanding the relevant personal circumstances of the client, Second,
focus on considering if the advice is reasonable in all the circumstances of the client and third
factor is to ensure that the advice is appropriate to the client given all the circumstances,
which means that the adviser should know their client better in order to produce a quality
advice.
The study concludes that in order to advise in the best interest of the client, the
necessity for a quality finance is required although the value of finance is tough to asses and
generates significant challenges. The study analyses the case of Storm’s collapse and
suggests some major lessons to be overviewed depending on certain specific conditions. The
first lesson is to consider the risk level tolerance of the client. Next, it focuses on seeking
clarity with the client regarding any underlying assumptions made by the adviser (Bruhn &
Miller, 2014). The adviser should take suggestions from professional peers if certain
strategies are not obvious to both the adviser as well as the client.
The Hayne Royal Commission and Financial Sector Misbehaviour- Lasting Change or
Temporary Fix?

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Kevin Davis of Melbourne University, Australia discusses about the Hayne Royal
commission case that reported financial sector misbehaviour in the year 2019. The paper
determines and describes the certain types of misbehaviour and recommends possible
solutions to control those misbehaviours. However, due to limited time and resources the
study fails to investigate and provide long term solutions to the complex issues and the
financial sector misconduct in Australia and globally. The study aims at arguing various
benefits that have emerged from the royal commission and will be short lived as the
misconduct is likely to resurface (Davis, 2019). The Royal Commission (RC) misconduct in
February, 2019 was reported in banking, financial services industry and superannuation. The
proceedings highlighted various cases of financial misconduct and identified the wrongdoers
and focused don altering various business models and conduct in the Australian Financial
Institutions (Davis, 2019). The Royal Commission limited its focus resulting in a flip side
misconduct and extremely poor behaviour harming the retail investors and financial
consumers. The paper made some relevant recommendations to the royal commission’s
misconduct to reduce the overall risk. The finance sector is broad, large and profitable sector
and the misconduct by the royal commission affected the future growth and profitability in its
sector. This paper briefly discusses the background of the royal commission followed by the
standards determined by the community and their expectations and competitions. Next, the
study explains the process of misconduct by the royal commission and identifies the
problems that resulted from the misconduct and their perceived causes (Davis, 2019). It
discusses the various underlying norms that describes a good behaviour such as obey the laws
and regulations, avoid misleading and act fairly in all circumstances, providing services that
are in the best interest of the client with proper care and skills.
The study focuses on 76 recommendations in the four primary sections, which were
banking, superannuation, insurance and financial advice. It discusses the poor behaviour that

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the large financial institution proposed by treating their clients with harsh criticism and
comments. The royal commission acknowledges the recommendations made and addresses to
seek the key issues. It simplified the laws and removed exceptions from the regulations and
removed the conflict of interests. The Commission improved the implementation and
compliance with the regulations with significant improvement in the cultural and corporate
governance practices resulting in increasing the protection of their financial consumers and
clients. This article discusses the corporate governance practices of the Royal Commission
and the structural changes that are to be made in the financial firm. The study concludes that
the Royal Commission is best viewed and took small steps in order to overcome the
misconduct practices and poor behaviour to their clients and financial customers (Davis,
2019). They incorporated various sensible changes in their laws and regulations practices. In
the absence of these practice however they were not feasible given the Royal commission’s
briefs and practices.
Best Interest Duties of Financial Advisers ― More Law, More Confusion
David G Millhouse in his paper of Best Interest Duties of Financial Advisers
discusses the basic concept and meaning of the term best interest and how it is used and
misunderstood differently in different domain such as law, media, legislature and financial
regulations. In case of investors, best interest of the client is misunderstood and confused
with concepts of loyalty to their client and their economic interests (Wilson & Lavery, 2019).
This differentiations in the interpretation of the term influences the relationship of the
advisers and the process they follow at the time of consulting. The Australian government
determines and defines various codes of ethics commonly known as the FASEA code of
ethics which is stated to be complex and uncertain and often lags a comparative jurisdictions
(Wilson & Lavery, 2019). The author of the study states the various complications that the

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laws and regulations have and how it can be simplified in order to resolve uncertainty and
misinterpretations in the best interest of the client.
The study starts with discussing the origin of the best interest duty and how the
heritage of the interest lies in equity to provide undivided loyalty and merely avoid harming
them. Followed by a detailed analysis of whether best interest of duty is a fiduciary duty.
Fiduciary, according to the article, can be defined as a status based (directors, agents, trustees
and many more) or a contractor based (such as financial planners, general laws) concept,
which should be conducted with no profit consent rules and include a duty of care (Wilson &
Lavery, 2019). It then discusses the best interest of duty in investment strategy, which is
compromised by lack of developments of laws and regulations in this domain. This results in
affecting the decisions made on the inward and outward capital flows and creates
jurisdictional risks. The concept of best interest of duty in the investment strategy lacks
definition and constitutes a defence in its due diligence. The next focus is on the best interest
of duty in financial advice. The Australian government defines certain code of ethics as
Financial Adviser Standards and Ethics Authority. Each financial advisory firms are
supposed to undertake and follow these code of ethics (Wilson & Lavery, 2019). According
to the research, succeeding testing in the year 2017 provided certain proofs, where 100% of
the financial advisers in the model trusted the statutory harmless harbour provision. 75% of
which claimed a reliance on it, which did not obey the constitutional best interest duty with
the client leaving 10% of their client in worse financial positions (Wilson & Lavery, 2019).
This damned evidence of the counting of general law fiduciary obligations arising from the
politicisation of the debate and sought to be cured by the FASEA Code of Ethics.
The future board of the FASEA code of ethics will be required to come up with
controls and grips to overcome the legal uncertainty that the codes have created. According to
David pollard, short term of best interest is not efficient and should be considered revising.

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The paper concludes that the dangers in the code of ethics is becoming an end in itself rather
than a model to benefit the clients, financial customers and investors.
Conceptualising Financial Advice in Australia: The Impact of Business Models and
External Stakeholders on Client’s Best Interest Practice
The study states that in examining the financial adviser sectors in Australia, it is
crucial to determine when and how financial advice and codes should be applied in the best
interest of the clients and the financial customers. It focuses on formulating and discussing
the various models differentiating the diverse types of financial advice and the best interest
practices in their relationships. The paper aims at revealing various business models to
prioritise the financial institution interest and encourage the best interest practices. This
article states various contributions which are as follows: first is to develop a general model to
determine the best interest of the financial advice and prioritise the extent to client’s best
interest (Wilson & Lavery, 2019). This model aims at determining the different forms of
forms of financial advice. The second addresses the understanding of the contextual
environment and surrounding that influence the financial advisers. It is determined with the
help of secondary research by analysing the past international practices and conflicts.
Another important contribution of this article to clearly understand the relationship between
the nature of the business, business models and the advice provided to that with the external
stakeholder or the clients (Brown, 2019). This framework aims at determining the initiatives
taken by the external stakeholders and how it helps in providing an advice which is in the
best interest of the client. It provides a clarity on the current initiatives taken by the
Australian government to reduce the risks and structural barriers.
This research paper undertakes both primary as well as secondary research in order to
achieve the goals and aims of the paper. Qualitative study is used to develop and understand

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the various theories and practices that are generated from the given case studies and data
(Wilson & Lavery, 2019). This research was carried out in three phases where the first phase
focused on the content analysis of the achievable data, which included regulatory documents
and regulated financial advice by the Australian government. Followed by the second phase
where the in depth semi structured interviews were conducted. The interview was conducted
among the eight financial advisors and their governance directors (Brown, 2019). These
interviews conducted would uncover the private and uncommunicable world to gain insights
of alternative assumptions and the ways of approaching it. The financial phase focuses on
undertaking the royal commission reports published in the year 2018 and 2019 in order
determine the triangulation strengths and validity of the research findings and data to enable
refinement of models and various frameworks that the article discusses. The paper provides
integrated frameworks and various models that provides financial advice in the best interest
of the clients and critically analyses them.
Analysis and Conclusion
The case about the Storm’s collapse talks about analysing the client’s risk tolerance attitude.
To understand if the client is willing to take risk or is risk averse is very important in order to
conclude what advice would be good for the client and would fall under the best interest of
the client. The FASEA code of ethics suggests an adviser to understand the client’s needs and
interests instead of assuming and then proceed according to the requirements.
The Royal Commission misconduct was one of the major report filled in the year 2019. It
highlighted the various misconduct of the commission and how their clients were treated with
disrespect and dishonesty. According to the standard 2 of the FASEA code of ethics an
adviser should and must act in the best interest of the client, which the Royal Commission
failed to do. The study in the report was done with proper analysis and authentic details.

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The other two evidences discusses about the third standard in the FASEA code of ethics,
which is about the conflict of interest. If an adviser is not sure of what he is advising, he
should seek clarification from his other peer professionals or refer the client to other advisers
in the market without hesitation. The study above discusses about how increase in number of
laws and regulations are leading to more confusion and conflicts. The research correctly
analyses the gap or the issue and is discussed in detail in the paper. However, the
recommendations made in the paper are weak and unrealistic as it fails to resolve the actual
issue.

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References:
Brown, R. (2017). The profession: The high road to relevance. Professional Planner, (97),
32.
Brown, R. (2019). Cracking the code life under standard 3. Professional Planner, (125), 28.
Bruhn, A., & Miller, M. (2014). Lessons about best interests duty.
Davis, K. (2013). Commission.
Davis, K. (2019). The Hayne Royal Commission and financial sector misbehaviour: Lasting
change or temporary fix?. The Economic and Labour Relations Review, 30(2), 200-
221.
De Gori, D. (2017). The FPA's blueprint for a professional tommorrow. Professional
Planner, (102), 50.
Millhouse, D. G. (2020). Best Interest Duties of Financial Advisers-More Law, More
Confusion. Enterprise Governance eJournal, 1(1), 1-14.
Sharpe, T. (2018). Back to school. Professional Planner, (105), 8.
Smith, M. (2019). The ethics lens. Professional Planner, (122), 4.
Wilson, W., & Lavery, R. (2019). 2030: Advice, investment and superannuation in a brave
new
world.