Question

Scenario 2 Brad is a financial adviser. Sonia, Brad's client, is a single mother. She is financially and emotionally stressed, as her daughter has been ill and hospitalised for some time. Sonia has had to cut back on her work to care for her daughter, even though the medical expenses are ongoing Advice: • In the initial face to face meeting Sonia appears to be distracted and has limited head space • There are no specific fees discussed, apart from the general range of fees in the FSG. • As Brad is currently extremely busy with his existing clients, he posts the fact finder/ client profile to Sonia and requests she post back the completed document, which Sonia does. • Six weeks later Sonia receives a 90 page Statement of Advice (SOA) in the mail. The SOA contains a broad range of strategies and unnecessary products, including accelerated debt reduction, rolling over superannuation, wealth creation and basic life insurance. Sonia can't comprehend and is confused by the SOA's summary. The SOA is accompanied by an invoice for the advice of $4,000. b) Which standards of the FASEA Code of Ethics are likely to be breached and why? (6 marks)

Answer 1

There are number of FASEA ode of Ethics breached in above case study, which are as follows

(A) Standard 2 dictates that financial adviser must act with integrity and in the best interest of client, here Brad didn't care to learn more about Sonia's financial position, requirements and hurriedly suggested a broad range of strategies no comprehensable to Sonia, without thinkig of suitability to client requirement, hence Brad has failed to act in best interest of his client Sonia..

(B) Standard 5 dictates that all advice and financial product recommendation given to client must be in his/her best interest and also appropriate to client's circumstances. Here, Sonia is disturbed on account of personal tragedy and Brad fails to cleary understand her requirement and also fails to communicate/advise her regarding best suitable approach or product to sort out her financial stress and sends her a bundle of complex financial products along with a hefty fee.

(C) Stnadard 6 dictates that adviser must take into account the broad effects arising from the client acting on his advice and actively cosnider client's broader long term interests and circumstances. Here, Brad fails to take care of Sonia's long term interests and suggests product, which she niether understand nor has financial capacity to bear the burden in case startegy fails to meet her required goals.

(D) Standard 7 dictates that Client must give free, prior and informed consent to all benefits Adviser and his principal will receive in connection with acting for the client , also adviser must satisfy himself that any fee paid by client to him or his principal are fair and reasonable. In above case study Brad failed to communicate clearly regarding the charges and act fairly on behalf of Sonia, without explaining her about financial products and her requirements , Brad sent a bill along with a borad range of complex financial products as  statement of advice.