“Conflicts are generally assessed as ‘potential’, ‘perceived’ or ‘actual’. In this and previous guidance, FASEA has suggested that Standard 3 only applies when there is an ‘actual’ conflict,” Ms Mulders said.

However, by suggesting that “if a disinterested person...would reasonably conclude...that the arrangements could induce the adviser to act”, the authority appeared to be describing a perceived conflict in its latest guidance, she said, which would create confusion for advisers needing to apply the code in real-world situations.

“Whether an adviser has managed a potential or perceived conflict will be determined on the strength of each client file, in particular the statement of advice.

“An adviser cannot fail Standard 3 in bulk any more than they can comply with Standard 3 in bulk. They need to apply their mind to Standard 3 and the rest of the code every time they provide advice to a client.

“Until we get the wording of Standard 3 more consistent with the well-developed legal standards for managing conflicts of interest, this standard is going to continue to be a real sticking point for the financial services profession.”

Ms Mulders said the current wording of the standard could be used to fail client files in the event of a large-scale file audit, without specific reference to the recommendations an adviser made.

She added that the authority’s guidance had also not yet approached the topic of in-house products, which was specifically relevant to managed accounts and could affect a large number of practices.

The comments come following the news the government would roll FASEA’s standards-setting power into the Treasury, as the authority is set to be scrapped in 2021.

Previous comments from legal practitioners have suggested that wording of the standards could be amended fairly simply if the Treasury chose to do this.