Professional Issues in Provision of Financial Advice and Roles Played by Different Parties in Financial Planning - Essay Example

Financial Planning Practices and Advice xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Table of Contents Table of Contents 1 Professional Issues in Provision of Financial Advice 2 Roles played by different parties in financial planning 4 The government 5 The regulator 5 The customers/client 6 The industry 6 References 7 Professional Issues in Provision of Financial Advice Professional ethics in financial advice are the standards and principles that financial planner should follow and which guides them in carrying out their work in general. The advancement of a professional set of competences has been observed as providing a scale of most excellent practice, an outline for discovering the relations between practices, a resource for organizational assessment as well as education and training. Competence of a financial planner cannot be observed but can be inferred from job performance by personal attributes. Competence in financial advice is a relational idea in that personal attributes such as knowledge and skills which are drawn in performing job in a specific work context. Therefore competence is recognized in performance but relies on ability of displaying a set of skills which includes the technical and behavioral skills (Jackling 2007). In financial planning advice, it is an obligation for the planner to maintain confidentiality of the data that is given or achieved. The information should be contained in an organization. The confidential data acquired as an outcome of professional as well as business associations in absence of apposite and exacting authority or unless a legal professional right or duty for disclosure is obtained. Confidential information obtained as an outcome of professional as well as business associations should not be used to personal benefits or the benefits of third parties (International Federation of Accountants 2010). On the other hand, integrity in financial planning inflicts an obligation on all the planners to be straightforward and also be honest in matters relating to professional and business associations. Ethics of integrity also entails fair dealing as well as truthfulness. The planner should not be related with the reports, communications, returns or any other data whereby the information is found to contain; a false or a statement that is misleading, an information that or the statements delivered recklessly, omission or obscurity of the information that should be included, whereby the statement becomes misleading (International Federation of Accountants 2010). Conflicts will always occur in an organization, whereby a member is expected to resolve it applying the basic principles. When instigating either a formal or informal conflict declaration procedure, it is advisable for the member either personally or in a group as an element of the resolution procedure should put into consideration pertinent facts, the ethical issues concerned, the basic principles associated to the questionable subject, reputable internal processes as well as different courses of action. Putting these issues into consideration, a member can be in a good position to settle on the suitable course of action that is reliable with the basic principles identified. In addition, the member shall also consider the consequences of every possible course of action (International Federation of Accountants 2010). Additionally, objectivity is another ethical issue on financial planning that should be considered by the planner. The planners should not in any way compromise their professional or business judgment because of prejudice, conflict of interest or the undue manipulation of others. The planner should avoid the biased associations or the unduly judgment of the member. The professional service should not be performed, if the situation or the relationship biases or unduly influences their judgment with respect to that service (Fisher 1997). For example HIH insurance failed to disclose some of its information on internal controls to its clients. Lack of concentration to elements, short of accountability for performance and the internal process purely lacked integrity and led to the biggest scandal in the Australian history of financial sector. This led to the collapse of the company as (Owen 2003) reports. Out of lack of integrity and out of neglegence the management failed to put up mechanisms to detect dangerous signs and encourage financial disclosure and prolonged existence. The management wasted resources extravangantrly, paying extra much for acquired business largesse as well as questionable transactions.The management and the auditors failed to inform the regulators and the general public of the company’s financial performance while having a duty to do so. Another financial company to have a market changing scandal is Adelaide Steamship Company which presented artificial better statements than the actual underlining statements of the company. (Carnegie 2007) confirms that this did not comply with existing accounting standards when revaluing its assets and related party profit dividends transfer. Roles played by different parties in financial planning There are a number of institutions and or organizations involved in the regulation of financial services provision. These scandals only bring the regulators to their failures and must do something to prevent the same. The governments of Australia, financial planning association of Australia, the clients/consumers and the whole industry have a crucial role to play in preventing financial scandals in future. The government The government through the ministry of commerce and in conjunction with financial planning association of Australia has to regulate financial planning to prevent injury and exploitation to the consumers. The government through the Australia security exchange (ASX) should have more of an insight role in to all financial planning companies. The government cannot wait for corporations to have scandals so as to act. It must come up with measures to ensure that the clients are safeguarded. As (Owen 2003) recommends existing laws should be ammended to extend and include the slasses of perssonel to whom duties are impossed by the standards. This will prevent management performing dishonestly in connection with their obligations given to them. On behalf of the government the reserve bank of australia on its report (RBA 2011) recommended that all players in the market should be given equal chances to improve efficiency. The (PJCFS 2009) report showed laxity that the government has in protecting the clients against exploitive financial planners. This indicates that the government must put up efforts to prevent financial scandals. The regulator The regulator in this sector is the financial planning association of Australia. It regulates the conduct of the financial planners. Though the association has been in the forefront in the provision of information to the public it has done little to implement its measures to cub scandals in this sector which are ever increasing according to (Smith 2010) report. The regulator seeks its members to carry out their financial planning with compliance to its code of conduct; serving the client first, integrity, fairness, confidfenciality, diligence, professionalism and competence. However some financial planners still act negligently abscoding their responsibility. The customers/client As the cliets go searching for information on how to invest their finances, they should be very carefull to whom they are aproaching for these services. The clients must ensure that the financial planner is authorised by the necessary authorities to carry out the business. They must have a licence from the government as well as the practising certificate from the financial planning association of Australia (FPA). This will ensure that only competent planners are in the market. the clients must ensure that they are provided with full infromation on the matters they are looking help for as (FPA 2011) outlines. The clients must be aware of the FPA and government regulations in place to avoid being exploited by the financial planners. Client for along time have been ignorant of mechanisms to protect them whenever they have a problem. The report by (RBA 2012) confirmed that clients are yet not sustisfied with the running of their funds by some financial planners. The report prepared by the reserve bank of Australia in conjuction with parliamentally joint committee on corporations and financial services found out that small firms and individual persons are limited in their choice, making the existing financial planners to exploit them by mismanaging their funds. They recommended that the regulatory authority together with the government to carry out an audit, shut down illigal operators of the services and only acredit competent providors in the market. The industry The financial industry is one of the key industries that drive the Australian economy. The public have been keen in searching for financial advice to invest their funds. More work however needs to be done to avoid embezzlements of client funds. The equality and human rights commision published an enquiry on sex discrimination in the financial sector (EHRC 2012). The commission reported the unequal opportunities in the industry and sought to dig in to the problem. The commission recommended introduction of staff communacation and training programe, parental support shemes available, equal pay audit and equal recruitment and reward systems should be developed. The (Carnegie 2007) report further indicates that One.Tel company directors withheld information delibarately from other investors making the conpany to colapse. The scandal was brown out by the company employees. The industry should do more to protect the client and investorss References Carnegie, G 2007 James cook university Accounting scandals in Australia since the late 1980 Canberra. EHRC, 2012 equality and human rights commission Inquiry into Sex Discrimination in the Finance Sector London. FPA 2011 Financial Planning Association of Australia Ltd The pillars of our profession Sydney. Owen, J 2003 Commonwealth of Australia the failure of hih insurance Canberra. PJCFS 2009 Parliamentary Joint Committee on Corporations and Financial Services Inquiry into financial products and services in Australia Canberra. RBA 2011 Reserve bank of Australia Submission to the Inquiry into Access for Small and Medium Business to Finance Canberra. RBA 2012 Reserve bank of australia Submission to the inquiry into family Business in Australia Canberra. Smith, J 2010 Victoria university Ethics and Financial Advice The Final Frontier Victoria. Fisher, R 1997 Syracuse University Press Interactive conflict resolution Syracuse New Yolk International Federation of Accountants 2010 Association of Accounting Technicians Code of Professional Ethics London Sullivan, B 2007 Academy of Financial Services Financial planners in Australia an evaluation of gaps in Technical and Behavioral Victoria. Read More