The barrier that is influencing Dino for making ethical decisions must be Emotional and Cognitive bias. The emotional biases generally arise spontaneously upon happing of some will full or unwilling event or based on the individual’s personal feelings while making decisions.

In the given scenario, Dino Salerno, the owner of a very successful chain of Italian restaurants is the client of Jim Gardener. He and his wife, Phoebe, have large investment portfolios, superannuation funds and insurance policies.

Dino in a statement verified about his positive diagnosis related to dementia which means he must have been facing issues related to decline in memory, solving problems, language and efficient thinking capacity. Such issues clearly indicate that Dino is not able to make wise investment decisions for himself and his family or in other words Dino has mental disability and such person cannot enter into a legal contract or make modifications like execution of an Enduring Power of Attorney or modifications in a will contract.

Dino might have a good intention of protecting the future of her wife by providing rights of superannuation and life insurance to her, but he wants to make backdated papers before his dementia diagnosis, which is not only unethical but also illegal.

b) Application of standards 1, 2 and 3 of the FASEA Code of Ethics to scenario

Standard 1: It states that a financial advisor should act considering all the laws applicable including the FASEA Code of Ethics, and should not make any avoidance their intent. Standard 1 of Ethics is the minimum ethical obligation that requires compliance of required legal obligations without any avoidance (FPA 2019).

The case of Dino in scenario 1 requires compliance of Standard 1 of FASEA Code of Ethics because Dino wants to enter into a legal contract or make modifications like execution of an Enduring Power of Attorney or modifications in a will contract.

He engages with his financial planner and a family friend Jim Gardener and requests/ instructs him to help him make such contracts with a back date.

Jim however is aware of the fact of disability or incapacity of Dino to enter into a legal contract and the contract will be declared ineffective if he makes such contracts as per the Australian Contact Laws.

Therefore Dino wants to sign the contracts on backdated documents and is of the belief that no one will know about such actions. But again backdating a contract will lead to legal consequences as such actions can be considered as illegal in the eyes of Australian common Law.

Standard 2: It states that a financial advisor should act with integrity and in the best interests of each of its clients.

Standard 2 is an ethical duty for an investment advisor to perform its activities or provide any guidance and advice with utmost integrity. The standard also requires performing actions by considering equal interests of each the client that means a financial / personal advisor should not be biased between its various clients or customers (Law Council of Australia 2019).

Integrity is an act of having openness, trustworthiness, honesty, frankness and accountability while making deals with clients. Section 961B of the Corporations Act also imposes a similar obligation on personal advices provided to a retail client to act in the best interests of the client.

Standard 3: It states that a financial advisor should not refer, act or advise in any manner where there is a conflict of duty or interest. That means if there is a conflict of duty or interest, proper disclosure about such conflicts must be made to the client and there should not be any further actions.

The general ethical principal states that an investment advisor should keep its clients interest ahead of its own interest. The standard addresses the conflict between duty to one client and another client.

The case of Dino in scenario 1 requires compliance of Standard 2 of FASEA Code of Ethics for Jim as

Dino requires Jim is not in a clear mental condition
He wants to conduct some illegal activities
His request is preventing Jim from making proper advisory and recommendations.
There might be restrictions under law, under licensee policies or under employer’s agreement to provide some particular services as required by Dino.
Clint is not Dino individually but Dino and Phoebe as a couple. Jim should not act as Dino does not want to make any disclosures to Phoebe (Australian Government 2019).

Application of value of honesty

The case of Dino in scenario 1 requires compliance of Standard 2 of FASEA Code of Ethics that talks about integrity, honesty and trustworthiness because Dino wants him to perform some wrong, unethical and/ or illegal actions which will violate the integrity of Jim as an investment advising professional, his honesties for the laws of his country.

Also Dino wants Jim to not disclose the facts about his disability due to dementia and the investments and legal decisions he wants to take in such state to his wife Phoebe who is also a client to Jim. Such actions will violate the honesty and trust that Phoebe has on Jim that means a violation to treat all the clients equally and disclosure of all relevant information to each of the client which can materially impact the decision making process of such client.

The response of Jim to Dino:

Standard 1: The request of Dino is a clear violation of the Australian Contract Laws and Standard 1 of code of ethics. Jim requires abiding by such laws, and there should be no attempt to avoid the intent of applicable laws after having clear knowledge of condition of Dino. Thus he should not act in accordance with Dino’s request and rather should advise Dino to include a capable and trustworthy person like his wife Phoebe in the decision making process (FASEA 2019).

Standard 2: Jim should consult Dino accordingly and collect additional information from him. He should advice Dino to include phoebe in the decisions making process as he is not mentally fit. Or Jim should himself inform Phoebe about the situation of Jim and his possible investment actions. Make discussions with Phoebe about the age care and mental disability needs with the help of a professional medical practitioner. Also discuss the financial planning related to the situation and medical requirements for Dino.

Jim should also clearly document that all the long-term needs of Dino and Phoebe (Wife) are going to meet if he acts in accordance with the advice provided.

Standard 3: Jim should not act upon the requests of Dino because it creating conflicts of interests.

Question 2

a) Discussion of issues raised in scenario 2

1. Carly is facing difficulty about making proper advising and recommendations to Simone Phillips who is financially little unstable due to her broken marriage and two dependent children. She is also a relative (little sister) to one of her wealthiest client Max Hall.

Simone is not wealthy and does not earn large but sufficient from the two sources of income, one as the settlement compensation from the broken marriage that has to be invested to purchase a house for herself and her two young children. The second source of income is the job at Max’s practice to look after patients’ records and appointments. Simone upon Carly’s recommendations is investing its salary in regular savings plan (ASIC 2019).

The problem arises when Simone wants to invests its settlement money also to become as wealthy as Max urgently.

1. However the investments can make a significant portfolio as per Carly but high returns have high risks also. The difficulty is that Simone does not have a backup plan; she has small superannuation plan and some funds in regular savings. And if the investments backfire then Simone might get into big trouble.
2. The second but the primary option is to invest the money where it is intended to, that means to buy home. This is a risk free investment and Simone will surely secure her and the children.

2. Application of standards 4, 5 and 6 of the FASEA Code of Ethics to scenario 2.

Standard 4: It states that a financial advisor should act for a client only after having prior consent of client which is free and informed.

This means that, before starting to act, proper, clear and simple explanation must be provided to the client related to the type of services, the terms and conditions, the records and documentation that will be made and the confidentiality and privacy arrangements applicable.

The case of Simone and Carly in scenario 1 requires compliance of Standard 2 of FASEA Code of Ethics for Carly because as mentioned in solution i. above, Carly is facing ethical dilemma in making proper advisory and recommendations to Simone Phillips (CPA Australia 2019). Simone has high desires but lesser finances and also has lower risks profile which does not allows her to make huge investments and take higher risks. She also has two children dependent on her and higher expenses including renting charges.

Carly is capable of making recommendations to make investments of the little amount of settlement and also can support her to buy a home using the same funds. Carly personally believe that it would be better for Simone to use the funds in purchasing a home for herself and her children.

The standard requires Carly to get a prior concept of Simone after informing her about all the facts related to her personal weaknesses/ strengths, preferences and capabilities. Also she needs to make Simone understand about her current situation and future financial needs as all discussed in the above discussion.

Standard 5: It states that a financial advisor should give its advisory and recommendations to be in the best interests of the client and according to his/ her individual situations. The advisor must get satisfied that the client understand the recommendation, its costs, benefits and risks related to the financial products along with reasonable explanation to be satisfied.

Standard 2 above concerns about the best interest of the client, standard 5 concerns the requirement for advisory to be appropriate to the individual circumstances of the client.

For the given case, Carly needs to make Simone understand about:

Her current circumstances in the form of little source of money, dependent children, rental expenses, etc.
She should also explain her that she should secure her future first by owning a house first (Lin, Abney and Bekey 2014).
She should also make the possibilities (both positive and negative) clear to Simone, related to investing money in risky portfolios.

Standard 6: It states that a financial advisor should consider the larger impacts arise when the clients’ act according to the advice provided. It should also take into account the long-term aspects and related circumstances of the client.

In the given case, Carly has two options to provide Simone as recommendation and services.

1. She can advise Simone to buy a house to secure the future for her and the children. In absence of alternate source of income, this might be the best plan for Simone to invest its settlement funds.
2. She can provide her investment services which can provide high returns but are proportionately heavily risky. Simone wants to become rich and is likely to take shortcuts for the desired goal. Considering the current circumstances and the long term aspect of Simone.

Such recommendation can lead Simone to earn heavy returns which can be utilised to buy a house in future, till that she has to pay rental expenses. Or she might witness lower returns or losses and the future gets ruined.

3. Application of the value of Fairness to scenario 2.

Value of fairness requires adopting professional objectivity in the operations of engagement with clients, and also whiling making recommendations of professional services and financial products. This also requires an advisor to deeply investigate, diagnose and evaluate a requirement of a client for professional financial services (Shahri et al. 2014).

Carly very well knows the current financial situation of Simone and her future goals, she is also aware about her personal life, family support, issues, obligations (financial and otherwise), sources of incomes, dependent members, current financial investments as both Simone and her elder Brother are client to her.

Simone is a woman with strong personality and Carly has sympathy and will to help her. She personally thinks Simone to buy a house, contradictory to her personal desires to make large money in a short span of time.

Application of APA’s Five principles to resolve ethical dilemma

Integrity: Carly should remain honest with Simone and advise her as per the current requirements and future goals.
Best Interests: Purchasing a house is in the best interest of Simone.
Conflicts of Interest: Carly is available to give investment services at lower price considering her weak financial state. But she should rather advise her to purchase a house which will result in zero fees from Simone.
Professional Expertise: Carly has more than 20 years of experience in the field of financial advisory. She should be well capable of diagnose the current situations and requirement and the future goals of Simone and consult her accordingly.
Informed Client Consent: Carly should take prior consent of client which is free and informed. That means Simone should be well informed about the pros and cons of the recommendation of Carly and afterward provide her consent (Lee et al. 2014).

Question 3

Discussion of issues raised in scenario 3

The barrier that might influence Chris for making ethical decision is the very high or blind trust of the couple Emilio and Rosa. The important reasons behind providing utmost trust to Chris for managing the investments and give financial advisory are as follows:

1. The couple were clients to Chris and had taken services from him in the past and they are very well aware of his capabilities, honesty, skills and professionalism.
2. The couple were not satisfied with the services of a separate adviser at the previous licensee group where Chris was providing his services.
3. The couple was paying high ongoing advisory fees but were in a strong belief that they were not getting the desired value in return against the ongoing fees.

Such blind trust can make Chris to be overconfident while making investment decisions for Emilio and Rosa. Chris can ignore the ethical values of due diligence and utmost care while making financial recommendations. He should recollect information from the couple about their current circumstances, future goals, investments portfolios, sources of incomes, etc.

But in the current scenario such information might not have been properly collected. For example Emilio is a person with high fitness and excellent health but his insurance offers charged loading, the reason was by Emilio was brief and additional information might require.

Apart from this Davi started making rollovers of the couple’s superannuation and insurances already while Chris was collecting information from them (Board 2014).

The other barrier is related to standard 7 of FASEA code of ethics that states that an advisor should charge reasonable and fair and should determine value for money to the client. Chris is going to charge a higher fee as compared to the previous advisor from the couple, however he has disclosed the higher charges and received the consent of the client but has not determined value for money to the client because client was blindly trusting Chris.

Application of standards 7 and 9 of the FASEA Code of Ethics to scenario 3.

Standard 7: It states that a client of the financial advisor should give prior consent which is free and informed to all the benefits that advisor and its principal will be receiving against acting for client. This also includes fees for services that are chargeable. The financial advisor should also get satisfied about the fees and charges that they are reasonable, fair and should determine value for money to the client.

The case of Chris and the couple requires compliance of standard 7 because Chris is going to charge a consideration against the advisory and portfolio management services. Also he is going to charge a higher fee as compared to the previous advisor from the couple.

Chris has informed the couple about the terms and conditions for his services in the new licensee group and disclosed the level of charges that will be substantially high and the service model for fee that will be in the form of fixed fees rather than commission. He also received

Here Chris must be fully satisfied that he will be able to serve the couple considering their current situation and future goals and will be able to add value for the fees the couple is going to pay him. However since Chris has substantial knowledge and experience of the industry and is also very well aware about the couple’s financial situation, desires and goals hence he will be able to deliver value for money to the couple.

Chris has been providing its services for past one year and the product replacement research states that the superannuation products as per recommendation proves to be cheaper than the previous products, and will also benefit them while converting into retirement income streams after 10 years.

Standard 9: It states that the advices and recommendation provided by the financial consultant to a client should be offered and delivered in good faith along with utmost competence and should neither be deceptive nor misleading.

The case of Chris and the couple requires compliance of standard 9 because Chris is going to provide the financial advisory to the couple and the will also recommend some investment products as per their requirement and benefit.

Chris as per the given scenario is conducting its actions in a very professional way, he also reflect his affection to the couple that is showing high level of trust in Chris and his services by waiving the normal initial consultation fee (Shaw 2016). He has made proper research before offering the products like the product replacement research that resulted in additional benefits to the client in the form of lower costing and higher or similar benefits than the existing products.

Thus it can be said that Chris provided his services in good faith without misleading the client. But the single point of default in his operations is that he has not made proper documentation or kept record of the work and also lost some important records due to server failure.

Value of Competence.

The electronic records from customer management system (CRM) clearly state that around a year ago, Chris had recommended the couple to switch their existing insurance and superannuation investments to the similar products that were included in the approved products list of GGFS’s (the licensee group Chris is currently working with).

The advisory provided by Chris and the products offered proved to be beneficial to the couple in a product replacement research that shows that superannuation products as per recommendation proves to be cheaper than the previous products, and will also benefit them while converting into retirement income streams after 10 years.

The research also showed that the benefits and premiums related to the insurance in the replaced products were very much similar with the previous products.

This reflects that Chris has conducted all the prior research before offering some recommendations to its client, this show his competence in his work. Also his recommended products proved to be cheaper than their existing products which are providing similar or better returns (Goodall 2014).

Chris is in compliance with the obligation to obtain prior and informed consent of the client which can be justified using the following points:

Chris disclosed the couple about the terms and conditions for his services in the new licensee group and informed that charges will be substantially high than previous and the service model for fee will be fixed fee rather than commission.

Chris also received the prior consent of the client related to the charges and fees.

Chris conducted a product replacement research for the recommended products of Chris that will replace the existing products used by the couple. The results of the research proved to be beneficial for the couple and the same were shared with them.

The records show that the couple provided its consent and accepted the revised insurance terms.

Question 4

As per the discussions of compliance officer of Alpha Omega Financial Group (AOFG) with the financial advisors of GGFS, it can be clearly stated that all of them are very well competent in the operations they are performing but there are some discrepancies in the recordkeeping obligations including both legal and ethical obligations which are stated as under:

The Corporations Act 2001 (Cth) (the Act), TASA, FPA and FASEA codes of ethics all in practice has made mandatory for all the advice licensee or its representatives to prepare accurate written records that fairly explain client information, recommendations to client, transactions with client, performance and financial position (Armstrong and Botzler 2016). These records have to be in access of the advisor during the whole period, they are needed to be retained.

The prescribed laws require the advisor and licensee group to meet the following standards:

Establish a record keeping system and review the record keeping process: GGFS, the licensee group is utilizing a customer relationship management system (CRM) to manage all of its client relationships and interactions with the existing and potential customers.

The law requires to capture documentary evidence of your interactions and communication with clients:
1. Dino Salerno and her Wife Phoebe both ate clients to Jim Gardener, the promoting partner of GGFS. In the case study it has been stated in the CRM that there was an ongoing advice meeting held two months ago when client’s portfolio were reviewed and rebalanced according to their risk profiles.

It also has a record about a phone message for Jim from Dino that required Jim to call back Dino. There is also a calendar entry that shows Jim and Dino has met last week. The records do not indicate anything about whether Jim returned the call and about the discussion that had been made during their meeting.

Dino is very well aware of the mandatory requirement to make written records or in this case update the CRM but he has not done this on purpose considering the ethical dilemma he has been facing after the conversation made during the meeting.

1. Davi Singh, the client support officer at GGFS has made substantial mistakes while updating the details of client (Simone Philips) of Carly Green, another promoting partner at GGFS. The CRM states that Simone is married and homemaker with one child (Van den Hoven, Vermaas and Van de Poel 2015).

The information in the CRM in incomplete and incorrect, the case study indicates that Simone is currently single and has recently divorced and she has two young children. Also Carly has information that Simone is not just a homemaker but is working and has a job at Max Hall’s (Simone’s brother and Carly’s wealthy client) medical facility.

Carly having the knowledge about the client should have made efforts to make reasonable updates in the CRM. Also she should have made written records about the ethical dilemma she is facing in providing proper recommendations to Simone.

1. In the case study of Chris Wilkins, he has made proper written records about his client’s personal information, their existing investments, recommendations provided by himself, the prior efforts to check whether such recommended products can provide value to the clients in the form of a product replacement research and also about the prior and informed consent he has received from its clients.

The only discrepancy observed in the direct conversation with Chris where he said that he has also taken prior and informed consent of Emilio and Rosa about the substantially high fees in the form of fixed consideration instead of commissions.

But there are no written records available about the same in the CRM. Chris also can make a written entry about the deep trust the couple is showing in Chris and his services and whether that has potentially diluted the ethical integrity (Critchley 2014).

Chris also added that they have not made sufficient paper work and more documentation have had required related to the couple’s file. Also he has not made efforts to recover the temporarily lost records due to server down.

Chris should make immediate updates in CRM about all the issues described above and make efforts to recover the lost files or make alternative arrangements regarding the same.

Financial advisers at GGFS in order to ensure the compliance of the value of Trustworthiness has to follow the FASEA code of ethics especially the standards including 1, 2, 3, 4, 5 and 6. All this standards are directing a financial advisor to follow the following important principles:

Compliance of all laws: this reflects the professionalism of the entity and make sure that actions are in the best interest of the client.
Integrity: The most important tool to ensure the compliance of the value of Trustworthiness is action with integrity. Integrity demonstrates sound ethical and moral principles, honesty and truthfulness, fairness and transparency, privacy and confidentiality at work and also respect and honour for clients.

Conflict of interest: the advisor should not act if he/ she observe any conflict of interest with law, client and duty. It should also make aware the related parties about such conflict of interest. This demonstrates professionalism and fairness of the advisor (Keown 2016).

Free, Informed and Prior Consent: The advisor in any case must inform and educates its client about the financial products, advices and their pros and cons on the financial situation of the client and their family members. It should also make further arrangements after receiving a free consent from the client. This indicates that advisor has made careful efforts in the benefit of the client.

Reference

Armstrong, S.J. and Botzler, R.G. eds., 2016. The animal ethics reader. Taylor & Francis.

ASIC. 2019. Professional standards for financial advisers. https://asic.gov.au/regulatory-resources/financial-services/professional-standards-for-financial-advisers-reforms/

Australian Government. 2019. Corporations Act 2001. https://www.legislation.gov.au/Details/C2017C00328

Board, B.A.C., 2014. Professional and ethical compliance code for behavior analysts.

CPA Australia. 2019. Become a financial adviser. https://www.cpaaustralia.com.au/professional-resources/financial-planning/how-to-become-a-financial-planner

Critchley, S., 2014. Ethics of deconstruction. Edinburgh University Press.

FASEA. 2019. Code of Ethics Standard commences 1 January 2020. https://www.fasea.gov.au/code-of-ethics/

Ferrell, O.C., 2016. A framework for understanding organizational ethics. In Business ethics: New challenges for business schools and corporate leaders (pp. 15-29). Routledge.

FPA. 2019. FASEA Code of Ethics. https://fpa.com.au/wp-content/uploads/2019/07/FPA-Understanding-the-FASEA-Code-of-Ethics-Version-1.pdf

Goodall, N.J., 2014. Machine ethics and automated vehicles. In Road vehicle automation (pp. 93-102). Springer, Cham.

Keown, D., 2016. The nature of Buddhist ethics. Springer.

Law Council of Australia. 2019. Regulation of the Profession and Ethics. https://www.lawcouncil.asn.au/policy-agenda/regulation-of-the-profession-and-ethics

Lee, Y.K., Choi, J., Moon, B.Y. and Babin, B.J., 2014. Codes of ethics, corporate philanthropy, and employee responses. International Journal of Hospitality Management, 39, pp.97-106.

Lin, P., Abney, K. and Bekey, G.A., 2014. Robot ethics: the ethical and social implications of robotics. The MIT Press.

Peters, R.S., 2015. Ethics and Education (Routledge Revivals). Routledge.

Shahri, A., Hosseini, M., Phalp, K., Taylor, J. and Ali, R., 2014, November. Towards a code of ethics for gamification at enterprise. In IFIP Working Conference on The Practice of Enterprise Modeling (pp. 235-245). Springer, Berlin, Heidelberg.

Shaw, W.H., 2016. Business ethics: A textbook with cases. Nelson Education.

Van den Hoven, J., Vermaas, P. and Van de Poel, I., 2015. Handbook of ethics, values and technological design. Dordrecht: Springer.
1. Put client’s interest before your own personal interests: make efforts to understand the personal and financial circumstances of the client, their future goals, current requirements, etc. Also make your clients to have knowledge and understanding about the products recommended, its costs, benefits, associated risks, etc. This will ensure that client has provided a free consent after getting all the required information and the recommendations are in the best interest of the client.
  1. Consider the long term interest of the client: Investments are primarily made to secure the future, some clients does not understands this simple fact and wants to get rich in a short span of time. It is the duty of advisor to make its clients aware about the basic facts of investing like risk return relationship, risk profiles, etc. and insists the clients to plan considering long term objectives (Peters 2015).