If you’re one of the millions of Aussies who makes your own investment decisions—over 70%— one of the likely reasons you haven’t used a financial adviser is that you’re just not sure who you can trust. That’s a fair assessment since this financial industry sector has been basically unregulated until the passage of the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017. Thankfully, this new legislation is making the financial advisor space more transparent.
What is FASEA
The linchpin of this new legislation is FASEA—the Financial Adviser Standards and Ethics Authority—which outlines and defines the educational and professional standards for financial advisers. New advisers had to complete the requirements as of January 2019, while existing advisers have a more generous timeline to complete their certifications.
This legislation established the Financial Adviser Standards and Ethics Authority (FASEA), the first attempt to set educational, regulatory, and ethical standards for advisers in Australia. What this means for the average Australian is that as of 2019, any new financial adviser has at least a bachelor’s degree, has taken and passed classes specifically designed for the profession, and agreed to abide by a Code of Ethics that ensures your interests come first.
The FASEA Code of Ethics
Perhaps the most important aspect of FASEA is the addition of the Code of Ethics. If you had assumed that your financial adviser was obligated to act ethically, it would be a bit of a pleasant surprise to learn that they have behaved well because it’s the right thing to do, not because their license was at risk. But, unfortunately, some investors have had to deal with instances where bad advisors acted unethically, which is why implementing this Code will help weed out those few bad apples.
These are the key points of the new Code of Ethics. Your financial adviser is now legally bound to adhere to these standards.
- They cannot act, advise or refer with a conflict of interest or duty.
- They must have your informed consent to implement any strategies recommended in their advice.
- They must recommend strategies that are appropriate and in your best interest.
- They must have your informed consent before they deduct any fees from funds they are managing on your behalf.
- They must ensure your privacy and confidentiality in their record-keeping.
- They must ensure their advice to you is not based on misleading information.
- They must communicate effectively to ensure that you understand the advice and any products they are recommending.
How the Code of Ethics benefits investors
The fact that only 27% of Aussies use a financial adviser speaks to not only the need for the FASEA oversight, but also shines a light on the other reasons you’re going it alone when it comes to investing.
Many people think they can’t afford the fees that an adviser charges. Others don’t think that they have enough money to justify the expense of a professional adviser. What they’re not seeing are the benefits—tangible and intangible—of seeking the advice of a professional.
Most people want the financial security that comes from saving, investing, and planning for retirement. A financial adviser guides you through the myriad of investment options and helps you create a roadmap for your financial goals, which is an invaluable tool for your mental and physical health.
A recent survey found that respondents’ mental and physical well-being improved after meeting with an adviser, and almost 40% said their family life got better. People who get help from an adviser, benefit from the thoughtful creation of investment and savings plans. Making them happier and less stressed about money—affirming that old adage that knowledge is power—knowing your financial situation gives you power over it.
Strategically managing your super is another reason to consult a financial adviser. Especially as your investment strategies should evolve over your career, for example, in the early years of your career, you might consider an aggressive growth portfolio before tapering off to conservative options as retirement nears. A trusted adviser can guide you to suitable investments for every stage in your life.
Transparency in the financial adviser sphere benefits investors
Historically, fees for financial advice have varied between financial firms, making it quite difficult for potential investors to compare, but the fee structure landscape has also evolved with FASEA. Big banks are getting out of the business as commission structures change, causing more boutique firms to become available with less aggressive fee structures. Online advisers are also a new trend in the business world, with online services also regulated under FASEA.
As a result of the national higher standards set out by FASEA, we’re now seeing fewer financial advisers than in past years. Those who have passed the exams have dropped from about 25,000 in 2018 to 16,000 as of July 2021, which is ultimately beneficial to all Australian investors.
Moving forward, we’ve seen a trend towards more and smaller financial advice firms that use digital technology to provide their customers with a big-firm experience. Financial advisors offer not only investment advice but also tax planning and asset management.
If you’d like to take advantage of the benefits a professional financial adviser can offer you, contact Super Network for an obligation-free consultation, we can expertly tailor a plan to your unique needs.
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