The Senate will not sit for another month after this week; if the bill is not assessed by today, it will be a while before it could be passed.

The Treasury Laws Amendment (2019 Measures No. 3) Bill amends the Corporations Act to defer the transitional time frames for the FASEA exam and tertiary education requirements.

It would see the transitional time frame for the approved degree or equivalent qualification deferred by two years to 1 January 2026, and the transitional time frame for the FASEA exam deferred by one year to 1 January 2022.

Phil Anderson, general manager of policy and professionalism at the AFA, called the original planned commencement date for the code from 1 January this year “totally unreasonable and impractical”, adding there is still a “high level of uncertainty”.

FASEA issued a guidance around life insurance commissions in December, which stated a number of requirements for advisers, including that their product recommendations are in the best interest of the client; that clients understand benefits, costs and risks; the advice and fee structure are appropriate for the client; and the remuneration would not lead the adviser to prioritise their own interests over the clients’.

Mr Anderson told advisers at the AFA Roadshow this week that while ASIC has given some certainty on its regulation and time frame, there are gaps in FASEA’s policy.

“FASEA has been very clear on saying that you cannot be paid for providing referrals. [But] they have not really answered the question about whether you can pay to receive referrals,” he said.

“And there are lots of businesses that do have models where they receive referrals, they may have an arrangement with an accounting firm, where they get a regular flow of referrals that they pay for. We can’t really see the conflict of interest there; that’s an issue that’s still outstanding.

“I’m making the point that the code only applies to individuals. It does not apply to corporates like licensees or corporate authorised representatives (CARs). So, this suggestion is that if the referral fee is received by the licensee or the CAR, and as long as it’s not passed on directly to a financial adviser, then it may not be in breach of the code.

“And that’s a really important point when you think about how you guys need to restructure your business.”

As the life insurance framework has caps on commissions and largely pay the same rates, he added, the issue of conflict is not with the product selected; rather, the level of insurance recommended, because the more coverage recommended, the higher the commission.

Mr Anderson noted recent media coverage of former FASEA director and CountPlus chief executive Matthew Rowe, where he stated that the code’s Standard 3 — which mandates that advisers must not advise, refer or act in any other manner where they have a conflict of interest or duty — is “unworkable”.

“I’m pleased that he did, because that’s the point I’ve been making for 12 months,” Mr Anderson said.

“I guess we wish he had made it more clearly and vigorously when he was on the board of FASEA.”

The standard’s viability could be explained away if applied to another industry, he commented, using the political process as an example.

“If Standard 3 applied to politics, then you would not be able to approve a special grant for anyone in your electorate or any electorate you’re aiming to target at the next election. I don’t think this pork barrelling started in the financial advice sector,” Mr Anderson said.

“We all know that politics is based upon doing deals, where conflicts come into play.

“And the reality is complete removal of conflicts is going to be incredibly challenging. And it’s really impractical and it doesn’t work in the best interest of clients.”

As it laid out in its statement in November, ASIC will not be monitoring or enforcing individual advisers with respect to the Code of Ethics, but it will still be required to comply and licensees will need to take reasonable steps to ensure their compliance.

The regulator said it would apply a facility compliance approach for Standard 3 and Standard 7, a rule around remuneration, until its new disciplinary body is in place from 2021.

The AFA has strongly recommended that advisers take note of the ASIC guidance, which Mr Anderson said provided a “very clear message”.

The consultation over the FASEA code is ongoing.

“What we say to advisers is, don’t rush to make important decisions,” Mr Anderson said.

“We have this facility compliance for two key standards. That’s not to say you shouldn’t do anything. You should be carefully reading the code and you should be considering the implications for it, and then start to plan what you may do once you have certainty.”

To date, roughly 20 per cent of advisers have passed the FASEA exam. Around 5,250 individuals have sat the exam, with around 88 per cent passing.

The AFA Roadshow continues.