The Association of Financial Advisers (AFA) admits its principles of practice will need more work to meet any future requirements of a regulator-approved code of conduct.

The Australian Securities and Investments Commission (ASIC) is working on guidelines for codes of conduct documents issued by professional associations and licensees to enable advisers to be exempt from the opt-in provisions of the Future of Financial Advice reforms.

The AFA has started the ball rolling by issuing a consultative paper on its Principles of Practice to prepare a code for submission to ASIC next year.

“We have been working on this draft for nine months as we saw moves to lift the professionalism and education standards of advisers,” AFA CEO Richard Klipin told insuranceNEWS.com.au.

“We took a view to lead the process, and this is an interim step until we know what ASIC’s requirements will be.”

Mr Klipin says the association has been in touch with ASIC about its draft code and has also spoken to institutional advice groups as part of the preparation of the document.

“What has been made clear since this time is that the code would need to be comprehensive, positioned at a level above the law and involve an obligation to service clients akin to the opt-in obligation,” he said.

“The AFA has decided to release this draft code of conduct for consultation with members, accepting the current Principles of Practice have not been designed with the intent of meeting the likely ASIC requirements.”

The consultative paper covers areas such as best interest, conflicts of interest, remuneration, product selection and replacement.

The code also defines the association’s membership requirements.

From July 1 next year all new practitioner members will be classed as provisional members until they have completed the Associate Chartered Financial Practitioner program.

Provisional members will be required to complete this program within 18 months of first joining the AFA.

Mr Klipin says at this stage the consultative paper is designed to encourage members to express their views on the draft code, with the period for submissions closing on August 31.

“The AFA will leverage these submissions and the release of the ASIC guidelines as part of the finalisation of a new code next year,” he said.

“The establishment of a leading edge code and the ongoing maintenance of this code will remain a critical focus area for the AFA.”