Understanding FASEA’s five values

28 February 2020

The five values in FASEA’s Code of Ethics are often overlooked, yet they are intended as paramount to the Code.

Compliance with the Financial Adviser Standards and Ethics Authority’s (FASEA) Code of Ethics (Code) is a requirement for all financial planners from 1 January 2020. The Code consists of 12 standards and five values. Its objective is to encourage higher standards of behaviour and professionalism in the financial services industry.

The five values in the Code are often overlooked. Yet, they are intended as paramount to the Code. In fact, FASEA requires planners to read the Code and apply it in a way that promote the values. The objective of this article is to explore the meaning of the values and provide illustrative scenarios that will help planners to better understand how they work in practice.

The five values

The Code requires financial planners to ‘always act in a way that demonstrates, realises and promotes the following values’:

  1. Trustworthiness;
  2. Competence;
  3. Honesty;
  4. Fairness; and
  5. Diligence

1. Trustworthiness

Being trustworthy is when you can be relied upon to be honest or truthful. A person’s ability to demonstrate trustworthiness is often tied to the conduct they display. It can take a considerable amount of time to build trustworthiness. However, poor conduct or unethical decisions may quickly render a person as untrustworthy. The Code defines trustworthiness as:

‘Acting to demonstrate, realise and promote the value of trustworthiness requires that you act in good faith in your relationships with other people. Trust is earned by good conduct. It is easily broken by unethical conduct. Trust requires you act with integrity and honesty in all your professional dealings, and these values are interrelated. Acting ethically, with trustworthiness, promotes trust in the profession of financial advice by consumers, enabling the community to feel confidence in accessing and utilising professional financial services.’

Keep in mind that the objective of the Code is to encourage higher standards of behaviour and professionalism in the financial services industry. FASEA rightly points out that trust requires that you operate with integrity and honestly. These are important principles that every client would reasonably expect their planner to exhibit.

‘My clients trust me’

Most financial planners would argue that their clients already trust them and may question why they are now required to demonstrate they are trustworthy.

Trustworthiness is a quality that clients value in planners, therefore, its inclusion in the Code is positive. Most planners can easily comply with this element of the Code.

Enshrining it in legislation is a good step forward in lifting the professionalism in the industry. If a planner cannot put their hand on their heart and declare they consider themselves trustworthy, do we really want them in our industry?

Example 1: Meet Jehan – Is she demonstrating trustworthiness?

Jehan is a financial planner who has been in the industry for over 15 years. One of her long-term clients is Mira, a widow aged 80. She and her late husband have been clients since Jehan started her business. Mira trusts Jehan implicitly.

Standard 5 of the Code requires that Jehan ‘must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products you recommend, and you must have reasonable grounds to be satisfied’.

Jehan has advised to Mira to make a downsizer contribution to her super fund, now that she has sold her home and moved into a retirement village. Jehan, keeping Standard 5 in mind, attempted to explain the advice to Mira. But Mira replied that she trusted Jehan and didn’t need to hear her explanation. Mira signs a statement that she understood the benefits, costs and risks of the advice provided to her.

Consider: Do you think Jehan demonstrated the value of trustworthiness?

While it’s clear Jehan has failed to comply with Standard 5, we have to consider that the values and standards of the Code are to be read together. By permitting Mira to sign a declaration to a statement that was untrue, she hasn’t demonstrated that she is honest or truthful, and therefore, has not demonstrated the value of trustworthiness.

2. Competence

Being competent means you have the knowledge, skills and experience to provide advice to your clients. For a moment, let’s ignore the fact that FASEA requires that you are competent. Instead, let’s consider whether your clients expect you to be competent.

It would be difficult to imagine a scenario where a client would be comfortable with a planner providing advice when they don’t have the necessary knowledge, skills and experience. Therefore, this element of the Code should encourage you to consider whether (or not) you are competent to be providing advice to your client. The Code provides the following guidance on competence:

‘Acting to demonstrate, realise and promote the value of competence requires you to have regard to the knowledge, skills and experience necessary to perform your professional obligations to each of your clients. It requires you to assess the professional services required by each client with regard to their individual needs, priorities, circumstances and preferences, expressed or implicitly identified as the subject matter of the financial advisory engagement. While it may be possible to supplement your professional competence by accessing the expertise of others, the duty of competence is ultimately personal and cannot be outsourced to others.’

The important point in this statement is FASEA’s requirement for you to assess your professional competence to provide services to each of your clients. You should consider your knowledge, skills and experience with a view to determining whether they are sufficient to provide advice for each of your clients. You also need to consider that each client is different, so your knowledge, skills and expertise may be sufficient to provide advice to one client but insufficient to provide advice to another.

‘But I have the relevant qualifications. Isn’t this enough?’

From 1 January 2020, the answer may be ‘no’. The value of competence requires you to have skills and experience, as well as knowledge. Therefore, in the absence of all of these requirements, planners may either consider developing their skills and knowledge in those areas where they lack competence through professional training and development, or consider declining to provide advice.

Example 2: Meet Zhang – Is he competent to provide advice?

Zhang has been a planner for 15 years. He has built up experience by working as a salaried planner for five years but has been running his own financial planning business for 10 years. While he is a competent planner in superannuation and tax, his area of speciality is self-managed super fund (SMSF) advice.

However, a client has asked him for advice relating to aged care. Zhang completed an aged care accreditation course back in 2014. He plans to contact a member of his licensee’s technical services team and ‘bounce the query off them’.

Consider: Do you think Zhang has demonstrated the value of competence?

Zhang may have failed to demonstrate competence, as he may lack the skills and experience to provide aged care advice. His knowledge can be supplemented by contacting a member of the technical team for their opinion. But is that enough to demonstrate competence?

Being competent means Zhang must have the knowledge, skills and experience to provide advice to his clients. Contacting technical services may assist with improving his knowledge and skills, but does little to add to his level of experience.

3. Honesty

Acting with honesty requires that you act with integrity. This value is closely related to the value of being trustworthy. The Code requires you to conduct yourself with integrity, even when this may be detrimental to you:

 ‘Acting to demonstrate, realise and promote the value of honesty requires that you conduct yourself with complete integrity in all your professional dealings with your clients and with all others that you engage with in a professional setting. It requires transparency, frankness and fairness to each of your clients, even where this may cause you personal detriment.’

In many ways, this value is closely tied with the best interest duty obligations under Standard 2 which states: ‘You must act with integrity and in the best interests of each of your clients.’ Planners are expected to put their own interests behind that of their clients.

Example 3: Meet Marsha – Is she honest?

Marsha is a new planner to the industry and has been working hard to build up her client base. She recently advised her clients, Matthew and Marco, to make a lump sum withdrawal of $25,000 from their superannuation. The clients returned the signed ‘Authority to Proceed’ and the signed withdrawal request. As Marsha was scanning the withdrawal request to email to the super fund, she noted it was incorrectly completed. The withdrawal request listed an amount of $2,500 not $25,000. She is aware the clients require the funds to pay for their cruise, so she alters the withdrawal request to $25,000.

By altering the withdrawal slip, Marsha has failed to demonstrate the value of honesty. It would be reasonable to question her integrity when she is willing to undertake such an action.

4. Fairness

Fairness, in a professional setting, requires you to consider your actions and whether they are honourable and equitable. This value requires that planners investigate and evaluate a client’s need for advice, and apply professional objectivity. This value connects with the value of competence, as planners are required to reflect upon their professional competency. The Code provides the following guidance on the definition of fairness:

‘Acting to demonstrate, realise and promote the value of fairness requires that you bring professional objectivity to the task of engaging with clients professionally, and when recommending financial products and professional services. It requires you to properly investigate, evaluate and diagnose a client’s need for professional services, and to self-reflect on the limits of your professional competency.’

Example 4: Meet Ari – Is he being fair?

Ari advises a number of high-net-worth clients. He specialises in providing advice to medical professionals. He operates on a flat fee basis. He provided advice to a doctor last month, to increase his life and total permanent disability insurance, as well as purchasing an income protection policy.

However, this client was very demanding. He called the office, made complaints about Ari’s receptionist, and expected Ari to be available after business hours. Ari under-priced the advice he was providing and wasn’t making any profit from this client.

Ari has a new client coming in today, who has been referred to by a former colleague. There are no referral payments involved, merely that his former colleague doesn’t do much work in the insurance space. He tells Ari that this client is very congenial and likes to leave the decisions to the planner. The potential client is a very successful cardiac surgeon. Ari decides to increase the flat fee for advice by $1,000 to offset the loss from the problem client.

Ari has failed to demonstrate the value of fairness, as he hasn’t treated the new client in an equitable manner.

Does Ari have another problem?

Standard 7 of the Code requires that planners: ‘Must satisfy yourself that any fees and charges that the client must pay to you or your principal, and any benefits that you or your principal receive, in connection with acting for the client are fair and reasonable and represent value for money for the client.’

The question is whether Ari has been fair and reasonable by charging an additional $1,000 to the second client. In this circumstance, Ari’s behaviour does not demonstrate fairness.

5. Diligence

Diligent planners meet their professional commitments in a proper manner, through exercising care and applying their skill, when delivering their services. The Code requires that a planner also manage resources to deliver advice in an efficient and cost-effective way for each client:

‘Acting to demonstrate, realise and promote the value of diligence requires that you perform all professional engagements with due care and skill. It requires you to manage your time and resources to deliver professional services in a timely, efficient and cost-effective way to each client.’

When considering if you are being diligent, you need to consider if your services are being provided in an expedient and timely manner. Carefully considering and managing the resources you have is critical, as it will assist you in meeting your obligation to deliver advice in a cost-effective manner.

Example 5: Meet Janet – Is she being diligent?

Janet has determined that each client will ‘sign a form’ indicating they understand the advice that she provides. Her view is that this will satisfy the requirements under Standard 5 of the Code – ‘you must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied’.

In her view, a ‘tick-a-box’ approach is cost-effective and will help satisfy her obligations. She believes that she is being diligent, as each and every client who receives advice will be required to sign the form.

Her business partner, Scott, learns about her approach. Scott is concerned she has failed to consider that she is personally required to have reasonable grounds to be satisfied that the clients have understood the advice. In his view, the ‘tick-a-box’ approach fails to meet Standard 5.

He raises his concern with Janet. He is also aware that he has an obligation under Standard 12 that he ‘must uphold and promote the ethical standards of the profession and hold each other accountable for the protection of the public interest’.

This example illustrates how professional judgement must be applied. One may argue that Janet has failed to apply due care and skill, and has failed to demonstrate the value of fairness.

Moving forward

Since the Code’s implementation, planners have needed to contemplate the values and standards together and apply their professional judgement to determine if they have complied with the Code.

This necessitates an element of subjectivity, as judgement has to be applied when determining if a planner has complied, or failed, to meet the obligations under the code. The risk is that there may be differing opinions. One person may consider a scenario as ethical and in alignment with the Code, another may not.

Adherence to the five values is vital to promote a strong and professional financial advice industry in Australia. No-one can doubt that trustworthiness, competence, honesty, fairness and diligence are values to which all planners should aspire.

Over time, guidance and shared understanding is likely to emerge, but for now, planners should carefully consider how the community or the regulator would view their conduct. Ultimately, doing more always provides greater protection for planners and clients than doing the minimum.

Troy Smith, Senior Technical and Regulatory Change Manager, IOOF TechConnect.



To answer the following questions, click here.

  1. What are the values in the FASEA Code of Ethics?
    1. Best interest, diligence, fairness, honesty, trustworthiness.
    2. Competence, diligence, fairness, honesty, trustworthiness.
    3. Best interest, competence, diligence, fairness, integrity, honesty, trustworthiness.
    4. Competence, diligence, fairness, integrity, trustworthiness.
  1. A planner provides advice to a client, who has reduced mental capacity and doesn’t understand the advice provided. However, the planner pushes ahead with implementing the advice. What value or values does this impact in the FASEA Code of Ethics?
    1. Trustworthiness only.
    2. Trustworthiness and honesty.
    3. Honesty and competence.
    4. Trustworthiness, honesty and competence.
  1. Mark has been advising for less than 12 months. He has a new client who has approached him for advice on business insurance. Although Mark completed a study module on business insurance when he undertook his degree at university, he has never actually provided advice on business insurance. If Mark provides business insurance advice to a client, which value is he likely to have failed to demonstrate?
    1. Competence
    2. Diligence
    3. Fairness
    4. Honesty
    5. Trustworthiness
  1. Helena has been providing advice for over a decade. One of her long-term clients is a married couple, Elizabeth and Phillip. Phillip is in hospital having had a car accident. Elizabeth is meeting with Helena.
  • Elizabeth: “I have that paperwork you requested … to withdraw $15,000 from Phillip’s super fund … Oh … you should see him … he is in a terrible state.”
  • Helena: “Thanks Liz. Okay. The withdrawal form is in order. Oh. But, the authority to proceed (ATP) isn’t signed.”
  • Elizabeth: “No problem, I’ll fix that up.” Elizabeth takes the ATP and forges Phil’s signature.
  • Helena: “Liz, I can’t really accept that paperwork. You don’t have a power of authority to sign on Phillip’s behalf.”
  • Elizabeth: “Oh, but this is just paperwork for you. The actual withdrawal slip is signed by Phillip.”
  • Let’s presume that Helena doesn’t accept the signed ATP. Which values is she demonstrating?
    1. Fairness and honesty.
    2. Honesty and trustworthiness.
    3. Competence, honesty and trustworthiness.
    4. None of the above.
  1. Benny has been a planner for 10 years. One of his long-term clients approaches him for advice about aged care.
  • Client: “Mum’s health has taken a turn for the worse. We have started looking at aged care homes, and a few places have handed me business cards of financial planners who provide advice on aged care. You have been our planner for the last seven years and really sorted out problems in our SMSF. I would like you to handle mum’s entry into aged care.”
  • Benny: “I would love to help. But I don’t know enough about aged care advice to really help your mother. She needs someone with skills and experience in that area. Honestly, it would not be in your mother’s best interest for me to provide advice.”
  • Benny refers his client to another colleague. Which values has Benny demonstrated?
    1. Fairness and honesty.
    2. Honesty and trustworthiness.
    3. Competence, honesty and trustworthiness.
    4. None of the above.