Ethics and Professionalism in Financial Advice
(FPC002B)
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Instructions to students
• This assignment covers Topics 1 to 7 and accounts for 40% of your final grade. • There are four (4) questions in this assignment. You should answer all questions. • The overall word limit for the assignment is 3,000 words. Marks will only be awarded for answers up to the word limit (plus 10%) for each question. Any material written after this will not be counted towards your mark for that question. Headings, quotes and references within the body of the answer are included in the word count. Numerical tables, calculations, and reference lists are not included. For more information on word counts and their rationale, go to Assessment à Assignment à General assessment information. • Refer to the Criteria-based Marking Guide for guidelines on what is expected for each question. • The ‘General assessment information’ section in KapLearn contains information about format and presentation, word limits, citations and referencing, collusion, plagiarism and other policies, useful resources, submitting your assignment and accessing your results. • Full workings must be shown for all calculations. Show all calculations in the text of your assignment and not attached as an appendix. Appendices to assignments will not be read. • Answers are to be in your own words. Reference and cite all your sources (within the text of your answer) when quoting or using material from external sources. Include a reference list at the end of your assignment. For further information on referencing, refer to the ‘Referencing Guide’ available under the ‘Build Your Skills’ tab in the subject room in KapLearn. • Marks will be awarded for research effort and referencing. • Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and resources. The weightings indicate the relative importance of each question. • State all assumptions used in providing your answer. • Requests for special consideration or information pertaining to special consideration written in the body of the assignment will not be considered by the marker. Refer to the ‘special consideration’ section of the Assessment Policy on Kaplan’s website for more information. |
| Learning outcomes (LO) mapping | Marks |
| 1. Explain the role of ethical frameworks and professional standards within the financial planning profession. | 25 |
| 2. Assess the impacts of cognitive, judgement and decision biases on financial advisers and their clients. | 20 |
| 3. Demonstrate an understanding of professional obligations and conduct required by the values and standards of the FASEA Code of Ethics. | 25 |
| 4. Identify and solve ethical dilemmas encountered as a financial adviser through application of ethical frameworks and professional standards. | 25 |
| Research and referencing | 5 |
| Total marks | 100 |
Assignment research and referencing (5 marks)
You are required to research beyond the subject notes in answering the questions in this assignment. Reference and cite all your sources when quoting or using material from external sources. Include a reference list at the end of your assignment.
You are required to:
- use appropriate presentation and format for your assignment
- demonstrate independent research and analysis
- demonstrate appropriate use of relevant references
- follow the Harvard referencing style as recommended in the ‘Referencing and Citations Guide’ available from ‘Build Your Skills’ tab in the subject room in KapLearn
- include a reference list at the end of your assignment following the recommended referencing style
- adhere with the assignment word limit.
Criteria-based Marking Guide for research and referencing
The Criteria-based Marking Guide provided at the end of each question is designed to assist students to understand what is expected of them in each question and to let them know how their performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.
| Excellent (Mark range: 4–5 marks) | Satisfactory (Mark range: 2.5–3.5 marks) | Unsatisfactory (Mark range: 0–2 marks) |
| • clear and appropriate assignment layout and structure
• adheres to assignment and question word limits • clear evidence of independent research and analysis incorporated throughout assignment • appropriate use of referencing • accurate use of Harvard referencing style • comprehensive reference list provided at end of assignment |
• adequate assignment layout and structure
• adheres to assignment and question word limits • some evidence of independent research and analysis • appropriate use of referencing • use of Harvard referencing style • reference list provided at end of assignment |
• poor assignment layout and/or structure
• assignment is significantly under or over the word limit • no demonstrated independent research or analysis • no use of references • referencing does not use Harvard referencing style • no or inadequate reference list provided at end of assignment |
Section A (95 marks)
| Instructions to students
There are four (4) questions in this section. Answer all questions. |
Case study
You are a senior financial adviser who has been employed by Gardener Green Financial Services Pty Ltd (GGFS) for the past four years. Jim Gardener (63) established his business 20 years ago and went into partnership with Carly Green (45) five years ago to establish GGFS, which holds an Australian financial services licence. Jim and Carly are the principals and owners of GGFS, and Carly is the responsible manager. Together with Jim, Carly and yourself, GGFS employs a paraplanner (Sam), an office manager and two client support officers.
Jim has 35 years’ experience as a financial adviser. His clients range in age from 55 to 75 years, and are mostly small to medium-sized business owners and self-funded retirees who are focused on managing business and personal wealth they have accumulated to support themselves in retirement and provide for their families in the event of their death or disability. Jim prefers to look after his existing clients and any referrals for new clients go to Carly or you, depending on the type of advice they need.
Carly has 20 years’ experience as a financial adviser. Her clients range in age from 35 to 55 years, and are established professionals and the well-off children of Jim’s clients. Many of her clients have self managed superannuation funds. She has a strong interest in improving women’s financial literacy and wellbeing. Her daughter, Sam, is the practice’s paraplanner and has completed an approved Bachelor of Financial Planning degree as she wants to become a financial adviser.
You have 10 years’ experience as a financial adviser and are fully qualified. You have experience with a wide range of strategies and clients. Half of the clients you service came with you to GGFS. When Jim or Carly are away or on leave, you provide advice to their clients. You agreed to supervise Sam while she completes her professional year.
Scenario 1
Sam, the provisional relevant provider, is about to meet with a new client — Kelly King. Kelly is the granddaughter of Jim’s longstanding clients, Cora and Fred King. Kelly has just turned 21 and is about to receive a substantial sum from a trust that was set up by her grandparents when she was born. Kelly is their only grandchild and she has just been made aware of the trust — not even her parents know about the trust. Cora and Fred have insisted that Kelly receive financial advice before she receives the funds to ensure she has a good plan in place to manage them wisely for her future.
Sam has attended many client meetings as a paraplanner, but this is her first meeting in her new capacity. She doesn’t have very much information about Kelly and knows she will need to collect a lot of information at this meeting. She is aware that she is required to provide advice that will be in Kelly’s best interests and asks for your advice on how to approach this interview.
You ask Sam about her current plan for the interview and she replies:
Well, as Kelly’s grandparents have been Jim’s clients for a long time and they’re very wealthy, I’m assuming Kelly will be pretty well-informed about investments in general and how financial planning works, so I shouldn’t have to go into a lot of detail about these aspects. I’ve already sent her my FSG, so I’ll get her to acknowledge she’s been given that.
I know that the trust money has been invested in a balanced portfolio including fixed interest, shares and property. She has a long-term investment horizon because she’s only in her 20s, so maybe she’ll want more growth investments — we’ve got some really great direct equity model portfolios that are generating high returns for our other clients that I can talk to her about. However, her grandparents may not be happy for her to change the investment mix — we may need to check with them about that. I doubt whether she’ll need any insurance — she’s coming into a lot of money and anyway, her family would look after her.
Question 1 (25 marks | Word limit: 800 words)
LO1: Explain the role of ethical frameworks and professional standards within the financial planning profession.
LO2: Assess the impacts of cognitive, judgement and decision biases on financial advisers and their clients.
LO3: Demonstrate an understanding of professional obligations and conduct required by the values and standards of the FASEA Code of Ethics.
LO4: Identify and solve ethical dilemmas encountered as a financial adviser through application of ethical frameworks and professional standards.
(a) Briefly discuss the issues raised by Sam’s current plan for her interview with Kelly in relation to:
- barriers to ethical decision making which may influence Sam
- compliance with relevant standards of the FASEA Code of Ethics
- compliance with a relevant value of the FASEA Code of Ethics. (15 marks)
(b) Based on your response to Question 1(a), what advice would you give Sam about adjusting her approach and communicating with Kelly at the first meeting? (10 marks)
Support your answers by reference to the case study facts and research.
Criteria-based Marking Guide for Question 1(a)–(b)
| Excellent (Mark range: 19–25 marks) |
Satisfactory (Mark range: 12.5–18.5 marks) |
Unsatisfactory (Mark range: 0–12 marks) |
| • identification and comprehensive explanation of one or more relevant barriers
• concise but comprehensive analysis of compliance with Standards 1, 2 and 9 • concise but comprehensive analysis of compliance with one or more relevant values • evidence of relevant independent research that supports conclusion |
• identification and adequate explanation of at least one relevant barrier
• adequate analysis of compliance with Standards 1, 2 and 9 • adequate analysis of compliance with at least one value • adequate and relevant advice in Q1(b) to address issues considered in Q1(a) • some evidence of independent research to support conclusion |
• inadequate identification or explanation of at least one relevant barrier
• inadequate analysis of compliance with Standards 1, 2 and 9 • inadequate analysis of compliance with at least one value • advice in Q1(b) is inadequate or irrelevant to addressing the issues considered in Q1(a) • little or no evidence of independent research to support conclusion |
Insert your answers to Section A: Question 1(a)–(b) below this line
End of answers to Section A: Question 1(a)–(b)
Scenario 2
You joined Sam to meet with Kelly for the first interview. You were pleased to see that Sam took on board your feedback and suggestions and adjusted her approach to the interview.
Sam obtained a lot of information during the interview. It emerged that Kelly is in her second year of an IT degree, studying full-time while supporting herself with Youth Allowance payments and casual work as a barista and website designer. While her grandparents are wealthy, her parents are not. They were nearly bankrupted during the global financial crisis due to the collapse of their business and have been careful to keep the details from Kelly’s grandparents. While Kelly doesn’t have a lot of knowledge about financial matters or investments, she is very keen to become more educated. Her parents’ experience has made her very conscious of security and she wants to prudently invest her grandparents’ gift.
Kelly asks Sam if receiving the funds will affect her current entitlement to Youth Allowance. When Sam confirms that it will, Kelly asks if she would be better off giving the funds to her parents to invest so she can keep her Youth Allowance benefits.
Apart from purchasing a small second-hand car, Kelly is happy to invest most of her funds for the next five years and reinvest the earnings (unless she loses her Youth Allowance benefits and needs income). The risk profiling questionnaire she completed with Sam indicated that she had a balanced risk profile overall. However, her answers to some of the questions relating to her perception of risk and how she would react to market volatility and poor investment performance are more indicative of a moderately conservative profile.
Sam isn’t sure whether she should consider an investment portfolio for Kelly with an asset allocation suitable for a balanced risk profile (based on the results of the full questionnaire), or moderately conservative profile (based on Kelly’s answers to these particular questions).
Kelly has only a very small superannuation account with a hospitality industry fund, with minimum insurance. She doesn’t have a will or enduring power of attorney. She says she hasn’t discussed her grandparents’ gift with her parents as it seems her grandparents wanted it kept secret, but she admits she feels a bit uneasy about maintaining the secrecy. She doesn’t understand why Sam is asking her about these aspects.
Question 2 (30 marks | Word limit: 1,000 words)
LO1: Explain the role of ethical frameworks and professional standards within the financial planning profession.
LO2: Assess the impacts of cognitive, judgement and decision biases on financial advisers and their clients.
LO3: Demonstrate an understanding of professional obligations and conduct required by the values and standards of the FASEA Code of Ethics.
LO4: Identify and solve ethical dilemmas encountered as a financial adviser through application of ethical frameworks and professional standards.
(a) Briefly identify and describe the ethical issues and potential barriers to ethical decision making raised by Kelly’s question relating to her Youth Allowance benefits. In responding to Kelly, what ethical framework should Sam adopt? (10 marks)
(b) Assuming Sam proceeds to recommend a balanced investment portfolio for Kelly and she accepts this advice, how would Sam be able to demonstrate that she has obtained informed consent to recommend and implement the advice, and that her advice was in Kelly’s best interests. (10 marks)
(c) Does Sam have any obligation to ask Kelly questions beyond those required to provide investment advice? What are some of the potential issues Sam is attempting to uncover, and why? (10 marks)
Criteria-based Marking Guide for Question 2(a)–(c)
| Excellent (Mark range: 22.5–30 marks) |
Satisfactory (Mark range: 15–22 marks) |
Unsatisfactory (Mark range: 0–14.5 marks) |
| • identification and comprehensive explanation of one or more relevant barriers
• selection of ethical framework well supported by case study facts and concisely but comprehensively explained • concise but comprehensive analysis of compliance with Standards 1, 4, 5, 6 and 7 • concise but comprehensive analysis of compliance with one or more relevant values (2c) • evidence of relevant independent research that supports conclusion |
• identification and adequate explanation of at least one relevant ethical issue and barrier
• selection of ethical framework supported by case facts and adequately explained • concise analysis of compliance with Standards 1, 4, 5, 6 and 7 • adequate analysis of compliance with at least one value (2c) • some evidence of independent research to support conclusion |
• inadequate identification or explanation of at least one relevant ethical issue and barrier
• selection of ethical framework not supported by case facts or inadequately explained • inadequate analysis of compliance with Standards 1, 4, 5, 6 and 7 • inadequate analysis of compliance with at least one value (2c) • little or no evidence of independent research to support conclusion |
Insert your answers to Section A: Question 2(a)–(c) below this line
End of answers to Section A: Question 2(a)–(c)
Scenario 3
A vital duty in your supervision of Sam during her professional year is to both ensure she understands the importance of maintaining complete and accurate records of advice and services, and that you have monitored her compliance with this requirement.
Question 3 (20 marks | Word limit: 600 words)
LO1: Explain the role of ethical frameworks and professional standards within the financial planning profession.
LO3: Demonstrate an understanding of professional obligations and conduct required by the values and standards of the FASEA Code of Ethics.
(a) Briefly explain the sources of the record keeping obligation, and the key reasons why it is important. (10 marks)
(b) When reviewing the advice provided to Kelly, what evidence will you look for to confirm Sam has met her record-keeping obligations? (10 marks)
Criteria-based Marking Guide for Question 3(a)–(b)
| Excellent (Mark range: 15–20 marks) |
Satisfactory (Mark range: 10–14.5 marks) |
Unsatisfactory (Mark range: 0–9.5 marks) |
| • identification and comprehensive explanation of relevant obligation sources and requirements
• concise but comprehensive analysis of compliance with the Corporations Act and Standard 8 (required record-keeping evidence) • evidence of relevant independent research that supports conclusion |
• identification and adequate explanation of relevant obligation sources and requirements
• adequate analysis of compliance with the Corporations Act and Standard 8 (required record-keeping evidence) • some evidence of independent research to support conclusion |
• inadequate identification or explanation of relevant obligation sources and requirements
• inadequate analysis of compliance with the Corporations Act and Standard 8 (required record-keeping evidence) • little or no evidence of independent research to support conclusion |
Insert your answers to Section A: Question 3(a)–(b) below this line
End of answers to Section A: Question 3(a)–(b)
Scenario 4
As part of Sam’s professional year program, you meet regularly to discuss her professional responsibilities under the FASEA Code of Ethics.
You are preparing for your next meeting, to discuss her obligations regarding conflicts of interest and the value of diligence.
Question 4 (20 marks | Word limit: 600 words)
LO3: Demonstrate an understanding of professional obligations and conduct required by the values and standards of the FASEA Code of Ethics.
LO4: Identify and solve ethical dilemmas encountered as a financial adviser through application of ethical frameworks and professional standards.
(a) Compare and contrast financial advisers’ conflicts of interest obligations in relation to:
- Corporations Act 2001 (Cth)
- FPA and AFA Codes
- FASEA Code of Ethics.
(4 marks each — total of 12 marks)
(b) Explain to Sam a financial adviser’s obligations in regard to the value of diligence. Illustrate with reference to the advice provided to Kelly. (8 marks)
Criteria-based Marking Guide for Question 4(a)–(b)
| Excellent (Mark range: 15–20 marks) |
Satisfactory (Mark range: 10–14.5 marks) |
Unsatisfactory (Mark range: 0–9.5 marks) |
| • concise but comprehensive analysis of conflicts of interest obligations including Standard 3
• concise but comprehensive analysis of compliance with the value of diligence and Standards 2, 5, 7 and 9 • evidence of relevant independent research that supports conclusion |
• adequate analysis of conflicts of interest obligations including Standard 3
· adequate analysis of compliance with the value of diligence and Standards 2, 5, 7 and 9 • some evidence of independent research to support conclusion |
• inadequate analysis of conflicts of interest obligations
• inadequate analysis of compliance with the value of diligence and Standards 2, 5, 7 and 9 • little or no evidence of independent research to support conclusion |
Insert your answers to Section A: Question 4(a)–(b) below this line
End of answers to Section A: Question 4(a)–(b)
End of assignment
