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This is an ethical advice exam.  One of the key knowledge areas will be to know the interrelationship between the Chapter 7 Part 7.7A Best Interests Duty (BID) and the new Code of Ethics.

At first glance, the Code of Ethics appears to be adding an ethical overlay on top of the Part 7.7A Best Interests Obligations.

However, on a closer reading it does far more than that.   The devil is usually in the detail and this is the case with the Explanatory Statement to the Code of Ethics.

The ethical platform is laid down in Standard 2 in a two-part statement, “You must act with integrity and in the best interests of each of your clients”

It demands that advisers act ethically to the highest professional standards, but it expressly binds advisers to do, or not to do certain actions.

Here is just one of many examples.

This one is found in Paragraph 36 of the explanatory Statement:

“You should take into account your client’s express wishes but these do not override your duty to give advice that is in the client’s best interests.”

This effectively removes a long held belief by some that the client is always right; and that advisers should give demanding or misguided clients what they want, regardless.

Indeed it is an adviser’s job to help clients to achieve the outcomes they want, but not always via the means the client wants.

As all advisers know, clients are sometimes prone to acting on impulse and reacting to peer pressure and greed; and all too often it can override caution and common sense.

This interpretation of the code prevents an over-obliging adviser from taking advantage of an insistent client, and / or appeasing demanding or misguided clients with inappropriate advice that would not be in their best interests.  In other words, it expressly obligates advisers to save clients from themselves.

The Code reinforces advisers as professionals with the training and experience to know the risks, problems and liabilities that can await clients down the track; with a duty to steer them in the right direction.

The following are some example of situations that are likely to be addressed by this statement (this is not an exhaustive list):

• Agreeing with insistent clients to proceed with a SMSF, knowing that it is inappropriate advice, and without sufficient inquiry into their relevant circumstances
• Acting for both spouses in separation and divorce proceedings
• Willingly over-gearing greedy clients into margin lending products when it is clearly inappropriate to their relevant circumstances
• Recommending over-risky superannuation investments to achieve an over-ambitious  client retirement target where the client clearly doesn’t understand the risks
• Willingly going along with client wishes and allowing them to getting themselves into trouble as a result of a range of ‘bar-b-que’ advice received from friends and relatives

For other examples of how the new Code of Ethics builds on the Corp Act best Interests Duty, register for one of my adviser exam tutorial programs.

You have the choice of

1. The 10-week live online version (starting 7^th August) or
2. The DIY Home Pack version. More information at http://garyweigh.com/

FASEA EXAM INSIGHTS #6 ‘Handy tips on how to prepare for your exam’ coming soon.

To catch up missed EXAM INSIGHTS read them at http://garyweigh.com/blog/

Working smart can help put structure and logic into your adviser exam preparation.

So there are two parts to preparing for the adviser exam.  They are acquiring knowledge and applying knowledge.

ACQUIRING KNOWLEDGE

There is such a lot of reading to go through so it makes sense to prioritise.  So try applying the 80/20 rule as follows:

20%

These are the really important bits that you need to know inside out.  At the minimum these include:

• Financial Planners and Advisers Code of Ethics AND Explanatory Statement
• Disclosure and conduct obligations
• Best Interests Obligations
• TPB basics for tax financial advisers PLUS the Code of Professional Conduct
• AML / CTF basics and resources for financial planners
• Privacy as it applies to financial advice situations

80%

At the minimum, you should have a good general knowledge of everything else on the FASEA suggested reading list.  Your level of understanding needs to be good enough so that if you see it in an exam question, at least you will recognise it and be able to make some educated decisions.

Tip: Reading the Corporations Act will get you a good night’s sleep but the way to absorb the important stuff is to use the Regulatory Guides where possible.  These guides exist where ASIC deems the subject matter to be important. RG121, RG175, RG244 and RG246 should be your best friends. And like best friends do, they provide helpful summaries of the important bits and many very useful examples. 

APPLYING KNOWLEDGE

For this, NOTHING BEATS PRACTICE!

Sitting in workshops and presentations is helpful but doing is learning!

In my 10-part program, I have created over 240 practice questions in multiple choice true-false and open-ended formats where you can test and apply your knowledge and check your answers.  You will get to practice on every topic.

And just when you think you have exhausted yourself, I have another multi-question mock exam for you to attempt.  This will be made available to you prior to sitting your adviser exam.

# FASEA EXAM INSIGHTS #4 A practical approach to an ethical advice exam coming soon!

To catch up missed EXAM INSIGHTS read them at http://garyweigh.com/blog/

This is the first of a 6-part series of insights into the FASEA adviser exam.

Some 600 advisers sat the first round of FASEA exams this month. Even though the specific content of future exams will continue to change across and within the next 8 sittings or so, there are some valuable takeaways that can be applied to every exam.

Firstly it is important to understand the significance of the exam curriculum published by FASEA.

• Financial advice regulatory and legal obligations
• Applied ethical and professional reasoning and communication
• Financial Advice Construction

I interpret this as:

• Know the rules that existed pre-FASEA (i.e. Ch7 Corporations Act, Privacy Act, AML / CTF, TASA)
• Know the new Financial Planners and Advisers Code of Ethics 2019 plus Explanatory Statement) really well; and be able to recognise breaches and potential breaches in any personal advice situation
• Know how to construct personal advice lawfully and ethically that is genuinely in the best interests of the client by any definition

In your exam preparation, the first step is probably the most challenging.  That is, knowing the pre-FASEA rules.

A large part of it is contained in ‘Vol 4 & Vol 5’ of the Corporations Act (ref. FASEA reading list).  The reading list reference looks innocent enough but there is a lot of it.

Even though every adviser was expected to have known all of this for the past few years, my experience to date is that most don’t.  And then there’s the other legislation mentioned above.

Many advisers have missed the fact that the Tax Agents Services Act 2009 also contains its own Code of Professional Conduct which binds every adviser by way of membership of the TPB. There is a lot of examinable information relating to tax financial advisers on the TPB site.

Expect a question on privacy because it is paramount for clients. Know the requirements for inter-office transmission of personal information, as well as local and overseas outsourced services (e.g. para planning, investment and audit services) plus third party referral situations.

Because financial advisers are ideally placed to detect suspicious individuals, organisations, beneficiaries and financial transactions, focus on suspicious matters that must be reported to Austrac. It is not only about money laundering and terrorism financing issues. It also includes tax evasion, superannuation and Centrelink fraud.

The new Financial Planners and Advisers Code of Ethics 2019 is FASEA’s pride and joy. It will feature prominently in every exam so know both the code and the Explanatory Statement inside out.  The latter contains some helpful examples in the Appendix.

It is also vital to understand where and how the Code of Ethics extends adviser obligations in the Corporations Act.  And don’t forget to read FPS003 Professional Year Policy and FPS004 CPD Policy.  They too will feature in an exam..

When looking for ‘applied ethics’ examples, focus on the long and unflattering history of the financial advice industry.  Consider the structure of the industry, where advisers and planners are employed, and the various pressures that advisers work under in different employment environments.

Focus on where the law has changed in response to society pressure and government policy e.g. conflicted & banned remuneration, fee for service and product switching.  More to come later!

Finally, some words of warning for financial advisers who specialise in one area only, e.g. risk insurance advisers.  This is an exam for all advisers.

This means exam scenarios, from which several questions will subsequently flow, are likely to cover a multitude of situations.  Whilst it is doubtful that the exams will be over-technical, it will help to understand the basics and terminologies of all relevant advice disciplines.

# FASEA EXAM INSIGHTS #2   “Understanding how the adviser exam is generated” coming soon!

After week 7 of my first 10-week Adviser Exam Online Tutorial Program, I have two advisers who have already enrolled in next month’s FASEA exam sitting.

Originally we were targeting September which would allow everyone to first sit the Kaplan fully supervised practice exam. And that will still be the case for the majority.

The change of dynamics in this group has been very pleasing. Seven weeks ago it was the gloomy silence of shared misery and now I sometimes have to use the Zoom mute button to get a word in.

Once these guys and girls got back into a weekly routine of reading, practice questions and group discussion, they have really grown in confidence.

Read their testimonials at http://garyweigh.com/testimonials/