FPC002B Ethics and Professionalism in Financial Advice - Case Study Assignment Help

Independent research

For some or all questions in this assignment, 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:

• considering multiple sources beyond topic notes or other provided resources
• ensuring sources 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 and the Criteria-Based Marking Guide.

Assignment referencing and presentation (5 marks)

Your assignment 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 assignment word limit
• follow the Harvard referencing style as recommended in Kaplan Australia: Harvard Referencing Guide (available from the ‘Build Your Skills’ hub in KapLearn) to cite sources throughout your assignment, and provide a reference list at the end.

There are four (4) questions in this assignment worth a total of 95 marks. Answer all questions.

Case study

You are a senior financial adviser, employed for the past six years by Donaldson Hall Financial Services Pty Ltd (DHFS) who holds an Australian financial services (AFS) licence. Wes Donaldson (age 55) commenced his career 25 years ago as a life insurance salesman, and 10 years ago established the

DHFS partnership with Melinda Hall (age 45). DHFS also employs Abi Blake (age 21), who is undertaking her professional year.

Wes Donaldson’s clients are mostly aged 55 and older, with retirement planning and insurance considerations as their primary needs. Many of Wes’ clients are successful business owners. Wes prefers to look after his existing clients and any new referrals are given to either Melinda or yourself, depending on the type of advice they are seeking.

Melinda Hall has 18 years experience as a financial adviser and her clients are predominantly aged between 35 and 55 years. Melinda’s clients are mainly established professionals, with a number also being the children of some of Wes’ wealthiest clients. Many of Melinda’s clients have self-managed superannuation funds.

Abi Blake was originally employed as the firm’s receptionist, and then become their in-house paraplanner. Abi has completed an approved Bachelor of Financial Planning degree, passed the Financial Adviser exam (previously known as the FASEA exam) and is currently in quarter three of her professional year as a Provisional Financial Adviser. Most of Abi’s activities during her professional year are supervised by Melinda.

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 currently service came with you to DHFS from your previous AFS licensee. When Wes or Melinda is away or on leave, you also look after and provide advice to their clients.

Scenario 1 (Donaldson Hall Financial Services Pty Ltd)

Abi is about to meet with a new client couple, Marcus Alexander (age 25) and his wife Lisa (age 24). Marcus is the son of Wes’ longstanding clients (and personal friends), Mark and Dawn Alexander.

Marcus works as an electrician and Lisa is a midwife working full-time at the local hospital. Mark and Dawn have insisted that Marcus seek financial advice now as Marcus and Lisa have recently placed a substantial deposit on a new home. The deposit was paid from Marcus’ distribution from his late grandfather’s estate. Marcus’ parents want to ensure he has a financial plan in place, especially now that he has financial commitments (mortgage), is receiving regular (significant) distributions from his late grandfather’s estate, and given he and Lisa are considering starting a family.

Abi has completed many client meetings, but this is her first meeting (indirectly supervised) in the capacity of Provisional Financial Adviser. She doesn’t have very much information about Marcus and Lisa, but is aware that she is required to provide advice that will be in her client’s best interests. While Melinda is away on leave, Abi asks for your support and guidance on how to approach this interview.

You ask Abi about her planned approach for the interview and she replies:

Marcus’ parents have been Wes’ clients for a long time and the family seem quite wealthy. Given the length of their relationship with Wes, I assume Mark and Dawn are both knowledgeable and comfortable with the general concepts of financial planning, risk and investing. I’m also assuming Marcus’ parents will be guiding him on what to invest in,

so I shouldn’t have to go into a lot of detail about financial plans and the relevant processes.

I’ve already emailed our financial services guide to Marcus and Lisa, so I’ll get them to acknowledge first up in our meeting that they’ve received and read it. I’m assuming that I don’t need to discuss insurance with Marcus and Lisa as they are very young and healthy (like myself) and Marcus has received quite a significant inheritance from his grandfather. I think initially they will just want some investment advice, particularly around the significant inheritance distributions, so they can really start to grow their wealth.

Melinda has shown me that for many of our wealthy clients, we often just follow their instructions — given they have this wealth, they must know what they are doing. I think these meetings, as they seem to be the quickest and easiest, are good practice for me.

• Define one (1) barrier to ethical decision making and explain how it may influence Abi while she is planning for the meeting with Marcus and (10 marks)
• Explain if Abi’s conduct complies with Standard 4 and Standard 5 of the Financial Planners and Advisers Code of Ethics 2019 in her dealings with Marcus and (10 marks)
• Discuss Abi’s compliance with the value of Diligence in the Financial Planners and Advisers Code of Ethics 2019 if she proceeds with the interview as (5 marks)

Support your answers by reference to the case study facts and research.

Scenario 2 (Donaldson Hall Financial Services Pty Ltd)

Melinda’s clients from Donaldson Hall Financial Services Pty Ltd (DHFS), Neil and Josie, call to arrange an appointment. While Melinda is on leave, she has asked you to assist with her clients. You will be meeting Neil and Josie for the first time and Melinda has told you they are valued clients because they often recommend DHFS to their family and friends.

Neil and Josie operate a successful marketing business, into which they’ve poured all their funds and time over the past 20 years. Neil recently won $1 million in a lottery and is keen to invest it to build their wealth for retirement, and they would like to have funds available to help their adult children if required.

In the meeting, you begin the fact-finding process and question the clients extensively to understand their current situation, goals and objectives. They seem to run a successful business, although while chatting with them, you notice they have very little knowledge or experience with investing, and their financial literacy seems to be immature for people with their level of success. During the meeting they appear disinterested and preoccupied as they chat between themselves about a client complaint that has arisen in their office.

Part-way through the meeting, Neil takes a phone call and states that they will need to leave immediately to take care of an urgent business issue. They say they will call into the office tomorrow to sign any paperwork required to invest the money. They tell you to ‘just invest the money in the way you think is best for us’. Neil and Josie explain to you that this is what Melinda does for them all the time, as they are not interested in how the process works, saying ‘we are good at marketing and we pay you good money to be good at managing our money’.

• Briefly identify and describe a potential ethical issue that may arise from Neil’s and Josie’s apparent minimal knowledge or experience with investing and overall disinterest in their financial

(10 marks)

• Identify at least three (3) relevant standards under the Financial Planners and Advisers Code of Ethics 2019 that have arisen for consideration based on the approach or actions that Neil and Josie have displayed, and explain the concerns, with references to the standards. (10 marks)
• Based on your meeting with Neil and Josie, identify and describe two (2) different ethical frameworks that would be appropriate to deal with this client interaction/situation. (10 marks)

Scenario 3 (Donaldson Hall Financial Services Pty Ltd)

Just before Melinda returns from leave, you meet with her clients Craig (age 47) and Penny (age 44) Keystone. Melinda met with Craig and Penny approximately 18 months ago, after they had come across from another financial adviser (with a different AFS licence). According to the file notes, Craig had contacted Melinda as they were unhappy with the service they were getting from the previous adviser. Craig wanted Melinda to review their previous financial plan and look after their financial plan in the future.

The previous file note shows that Melinda provided them with advice to switch their superannuation and insurance to products on the Donaldson Hall Financial Services Pty Ltd (DHFS) approved products list.

The product replacement research showed the recommended superannuation products to be significantly cheaper than Craig and Penny’s previous products and could be easily commuted to a retirement income stream (when required in the future). It also showed that most of the insurance benefits and premiums in the replacement products were broadly comparable with their previous products.

While it appears the products were comparable, from your experience one of the replacement products has longer waiting periods and shorter benefit periods. You also notice in the file that the insurance provider has provided cover with a significant loading, which resulted in the premium being higher than the previous policy. The records show that Craig accepted and signed the insurance documents, but there are no notes of Melinda discussing the different terms and definitions with either Craig or Penny.

Before proceeding with the statement of advice, you wait until Melinda returns from leave and ask her about the previous advice. Melinda explains as follows:

Craig and Penny contacted me out of the blue last year asking for an appointment. They were unhappy with the turnover of advisers at the previous financial planning business. They were paying ongoing advice fees but didn’t feel they were getting any value for those ongoing fees (approximately $2,500 p.a.). I explained to them I would be happy to meet with them and would waive my initial advice fee. I told them I charge fees rather than commissions, so the cost of my advice could be much higher than their previous adviser. Craig still wanted to go ahead, as he was adamant they wanted me to be their adviser and felt that even if my fees were higher, he would be okay with this. I also recommended that they take up my

‘annual service package’ for ongoing services for a period of 364 days, as keeping it to less than a year meant they wouldn’t have to worry about more paperwork coming through such as fee disclosure statements etc.

In regard to their superannuation and insurances, Craig had always been in excellent health and very fit, so I was surprised when his insurance offer came back with a significant loading and I did speak to Craig about this. Craig said he was comfortable that the superannuation contributions would more than adequately cover the premiums and we proceeded with the rollover and established the insurance. Penny wasn’t too involved with the process as

Craig appeared to be making the decisions and taking control of the family finances. Penny didn’t actually say too much during the initial appointment.

I realise there isn’t much paperwork or many file notes in their file. I’ll have to check with our paraplanner as he mentioned we may have temporarily lost some records when our computer server went down.

• Explain what Melinda should have done to demonstrate compliance with the Financial Planners and Advisers Code of Ethics 2019 value of (5 marks)
• Identify and discuss how the obligations under Standard 1 and Standard 7 of the Financial Planners and Advisers Code of Ethics 2019 apply to the issues raised in this scenario. (15 marks)

Scenario 4 (Donaldson Hall Financial Services Pty Ltd)

Wes Donaldson recently took leave, and when he returned, Abi spent some time with him discussing her recent meeting with Wes’ clients Hugh and Debbie Martins. Hugh and Debbie had advised Abi that they were in the process of separating but wanted DHFS to continue to advise them during the separation and afterwards because of the relationship they had with Wes and the firm. Abi believed this would be okay but mentioned to you that she wasn’t sure whether she had provided appropriate advice, given she is still new in her role. She also used her meeting with Wes to find out if and where Wes had recorded the clients’ information from his previous interactions with them. Wes explained that most of the interactions had been informal and generally conducted on the golf course, mainly because Wes and Hugh had known each other for many years. Abi learnt that Wes has been a reliable source of referrals for Hugh’s accounting business and the golf games were Hugh’s way of thanking Wes for the client referrals.

As part of Abi’s professional year program, you have been coaching her recently and have been discussing her professional responsibilities under the Financial Planners and Advisers Code of Ethics 2019. You are preparing for your next coaching session when you will confirm Abi’s understanding of Trustworthiness and her obligations under this value (according to the Financial Planners and Advisers Code of Ethics 2019), particularly as Abi is questioned whether she has been ethical when advising her clients.

• Explain whether Wes is likely to have met or breached the conflicts of interest obligations under the Financial Planners and Advisers Code of Ethics 2019 in his dealings with Hugh, and whether it would be possible for DHFS to continue to advise Hugh and Debbie through their (15 marks)
• Explain Abi’s obligations regarding the value of Trustworthiness, with reference to the clients of Donaldson Hall Financial (5 marks)