“One Code to rule them all, One Code to find them, One Code to bring them all and in compliance bind them.”
— J R R Tolkien. Translated from “ash nazg thrakatulûk agh burzum-ishi krimpatul”
Too much ethics?
It is possible to have too much of a good thing.
Although we’re convinced that an emerging advice profession requires a strong ethical foundation, the reality is that the disparate, territorial and inconsistent approaches adopted by the various stakeholders not only frustrate progress but introduce unnecessary complexity.
At the risk of alienating some, we’d argue that harmonisation and simplification are essential preconditions for any sustainable reform.
At this point in time, a financial adviser can potentially be expected to comply with three or more ethical codes, including the
- FASEA Code of Ethics;
- FPA Code of Professional Practice;
- TPB Code of Professional Conduct;
- AFA Code of Conduct;
- AIOFP Code of Ethics;
- CA Codes and Standards.
Although many advisers believe that compliance experts need complexity and confusion to survive, we have an entirely different view. Real professionals embrace clarity and simplicity, and these values should be reflected in the laws and regulations that direct advisers’ conduct.
This is why we have consistently argued for the harmonisation of the various industry codes.
We’ve publicly addressed the cost, complexity and contradictions of these various arrangements and emphasised the need for a harmonised approach in our submission to FASEA.
But, is one Code of Ethics for the Financial Advice sector possible?
Can self-interest be set aside in favour of the collective interest?
Are we barrelling towards an update to the FASEA Code of Ethics and missing a golden opportunity to effect real and effective change?
Are we, as an emerging profession, mature enough to pursue clarity and consistency by producing a system of concepts/principles that can be universally applied?
Is harmonisation possible?
To be fair, it’s an insanely ambitious goal.
The European Union may be an exemplar of achieving harmonisation across laws, but even they struggle to achieve harmonisation. From their perspective, ‘territoriality’ is the Achilles heel of harmonisation.
Whether you interpret “Territoriality” as self-interest or self-righteousness is irrelevant; whatever the motivation, it’s simply an unwillingness to compromise for the common good. Although we’ve seen recent examples of the FPA and AFA approaching detente, and “speaking with one voice”, we’re still some way away from the singularity. Ministerial optimism aside, there’s a range of associations and stakeholders “speaking with one voice” on behalf of advisers.
In this environment, is it realistic to claim unity and simply dismiss the territorialism plainly evident across our industry?
On a more practical level, do we really need multiple codes and standards?
We think rationalisation and harmonisation is essential.
Harmonising, not excluding
“I like harmonizing with other people, but a lot of times, I do harmonize with myself.”
— Kate Pierson
To be clear, we’re not endorsing a particular party or promoting a particular set of standards.
We are not even suggesting either the need for, or desirability, of a ‘single voice’.
Instead, we’re simply arguing that, as advice professionals, we should be singing the same lyrics, regardless of whether we are a soprano, alto, tenor or bass.
In fact, without the harmonisation of codes we are unlikely to secure uniform rules, enhanced certainty, increased transparency or greater regulatory predictability.
We appreciate that the various codes are ‘generally’ similar, but our analysis shows some significant differences between them.
In fact, comparing the FASEA, FPA, TPB, AIOFP and AFA codes side by side highlights some key differences between them and the FASEA Code. It also exposes an outlier value in the FASEA Code that is simply not present in the alternative standards.
Compare and contrast
At a fundamental level, the Codes – like the Hemsworths – are broadly similar, obviously related and, in some cases, indistinguishable and undifferentiated.
Although independently created without reference to each other, the Codes contain a number of common values and principles. Aspirational values of Integrity, honesty, competence, diligence, fairness, and confidentiality occur, as you can see below, with predictable regularity but with different priorities.
FASEA Code of Ethics: Trustworthiness; Competence; Honesty; Fairness; Diligence
FPA Code of Professional Practice: Client First; Integrity; Objectivity; Fairness; Professionalism; Competence; Confidentiality and Diligence
TPB Code of Professional Conduct: Honesty and integrity; Independence; Confidentiality; Competence; Other Responsibilities
AIOFP Code of Ethics and Standards: Objectivity; Proficiency; Integrity; Confidentiality and Professionalism
AFA Code of Conduct: Integrity and Professional Conduct; Best Interests; Conflicts of Interest; Informed Client Consent; Service Standards; Professional Expertise
Divided by common values?
For some bodies (the FPA, AIOFP and AFA), the aspirational and ethical values are little more than restatements of statutory requirements. For example, references to ‘objectivity’; ‘client first’; ‘best interests’; conflicts of interest’; ‘informed consent’ echo the minimum standards already enshrined in law; the best interests duty, client priority rule and conflicts of interest are already well covered in the legislation and regulations.
Are the Codes so vastly different that they need to exist independently or, as we believe, do we now have an opportunity to move beyond partisanship?
A study of other professional codes such as the legal and accounting codes indicate a great deal of similarity. Lawyers have a paramount duty to the court and the administration of justice as well as acting in the best interests of a client; being honest and courteous; delivering legal services competently; diligently and promptly; avoiding any compromise of their integrity and independence and not be prejudicial to or diminish the public confidence in the administration of justice or bring the profession into disrepute.
The fundamental principles Accountants must abide by include integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Arguably we could just as easily pick up the legal or accounting codes, and apply them, with minor modification.
What seems curious about the FASEA Code Principles, is the inclusion of trustworthiness. It seems to be an outlier in comparison to both the other financial adviser codes, as well as the legal and accounting profession.
Common values, different priorities
We think that the emerging advice profession requires a single code articulating fundamental and ‘self-evident’ values.
However, we appreciate that each territorial army has its own view of the ‘self-evident’ values and their priority and importance.
The appropriate values should be a matter for all advisers to determine and, to assist you, the following tables summarise the main players’ principles and standards.
Harmonisation won’t happen overnight, and it may never happen at all, but it’s a goal on which we should focus despite the obvious challenges, self-interest and territorialism.
In fact, if a sustainable advice profession is to emerge, we’re obliged to try.
If you’d like to try, or want to be heard, please reach out and add your voice to those of your peers that think the same.
Advocate for change. It’s your time to be heard.
If we can help, email us at firstname.lastname@example.org. If you are interested in reviewing our recent submission to FASEA, please click here.