FPC002B Ethics and Professionalism in Financial Advice - Case Analysis

Independent research

For all questions in this analysis task, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.

This includes:

• consideration of multiple sources beyond topic notes or other provided resources
• sources included are academically sound and credible
• analysing and understanding the argument or information the source presents
• using the material appropriately to directly support your

Where significant independent research is required for a given question, it will be clearly indicated in the question instructions and the Criteria-Based Marking Guide.

Analysis Task referencing and presentation (5 marks)

Your analysis task should be presented in a clear and appropriate format, with all sources correctly referenced and cited.

You are required to:

• structure a clear response to each question, using headings if required
• number questions (including sub-questions) and pages
• use correct font style and size
• ensure tables or graphs are clearly labelled and readable
• clearly set out calculations or workings, where they are required
• adhere to the analysis task word limit
• cite sources and provide a reference list at the end of your analysis task. It is recommended to use Kaplan Professional’s preferred referencing style, Harvard (see Kaplan Australia: Harvard Referencing Guide, available from the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.

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Question 1         (20 marks | Word limit: 300 words)

Define the following two (2) barriers to ethical decision making, and include brief examples of how these barriers or biases could adversely affect a financial adviser’s decision making when providing financial advice:

• rationalisation (10 marks)
• confirmation (10 marks)

Questions 2, 3 and 4 are based on the case study below.

Don works as a financial adviser in a practice with three other advisers. They each own 25% of the business, and while they each look after their own clients, they do share back office, paraplanning and administration support within the practice. As with many other advice practices, Don and his partners are developing and refining their work processes to ensure they are compliant with the Code of Ethics, and are determined to position their advice practice at the pinnacle of ethical standards in the profession.

Geoff has been a close friend of Don since their teenage years and has sought Don’s advice on a range of financial issues including his superannuation and personal insurances. Don has never asked friends

or family about their financial affairs and has only ever dealt with them when they have approached him. While Don and Geoff have discussed financial issues in general in the course of their friendship over many years, Don has never explicitly provided Geoff with financial advice.

As Geoff has recently proposed marriage to Don’s sister Emily, he wants to get his financial affairs in order before the wedding later this year. Geoff has provided Don with his latest superannuation statement and

a couple of payslips, and suggested to Don that he call his accountant Michael to get a copy of his latest tax return. Michael, also a friend of Don, has been his accountant for many years, and it was Don that referred Geoff to Michael about five years ago.

Geoff says he trusts Don without question. He has also told Don not to worry about all the paperwork he normally has to provide to clients and will just do whatever he tells him to do. As a friend and soon to be relative, it is unlikely that Geoff will take any formal action against Don in the event of a dispute, so Don is considering just telling Geoff what he needs to do to sort out his financial affairs rather than working with Geoff through the formal advice process.

Question 2        (20 marks | Word limit: 300 words)

Using an ethical framework or theory and the facts presented in the case study, discuss ethical considerations for Don in taking Geoff on as a client.

Question 3     (10 marks | Word limit: 150 words)

At the latest practice partners meeting, all four partners agreed from an ethical point of view that they should not provide advice to their own family members or close friends. Instead, they would organise for one of the other advisers in the practice to provide financial advice in these situations. In line with this arrangement, Don has referred Geoff onto Anita, who is one of the other advisers in the practice. Don has stepped back and has not taken part in the advice process between Geoff and Anita.

A week after Geoff has begun to implement Anita’s advice, the practice support manager comes to ask Don a quick question. During this discussion, she mentions in passing that Geoff’s insurance applications have all been accepted without any concerns raised by the insurance underwriters. This surprises Don, as he is well aware that five years ago, Geoff injured his knee quite seriously while they were playing squash together. In Don’s professional judgement, he would have expected the insurance underwriters to have placed some exclusion or conditions on Geoff’s insurances due to the damage to Geoff’s knee.

As Don was not a part of the advice process, he assumes that Geoff discussed this information with Anita and that it was appropriately disclosed to the insurer. Don sees this as a good outcome for Geoff and decides to take no action.

Define motivated blindness and discuss how it may have influenced Don’s ethical decision making and how this blind spot could or should be avoided.

Question 4         (20 marks | Word limit: 300 words)

Evaluate and explain, with reference to the case study facts and the relevant legislation, if the financial adviser (Don) has acted in the best interests of the client (Geoff). In your discussion also provide comment on whether Don has acted in the best interests of the financial planning profession.

Question 5         (25 marks | Word limit: 450 words)

(a) Briefly explain the difference between a profession and a professional, and whether (providing examples) all participants must be professional to be regarded as a profession. (10 marks)

(b) Discuss whether financial planning should be regarded as a profession and the potential barriers to this (15 marks)