Reference no: EM132760193

Case study

You are a senior financial adviser, employed for the past six years by Brown Green Financial Services Pty Ltd (BGFS) who holds an Australian financial services (AFS) licence. Martin Brown (age 48) commenced his financial planning career 20 years ago and seven years ago established the BGFS partnership with Carly Green (age 38). BGFS also employs Bianca Smith (age 21), who is undertaking her professional year.

Martin Brown's clients are mostly age 55 to 75 years and are small to medium-sized business owners and self-funded retirees. Martin prefers to look after his existing clients and any new referrals are given to either Carly or yourself, depending on the type of advice they are seeking.

Carly Green has 12 years experience as a financial adviser and her clients are age 35 to 55 years. Carly's clients are established professionals and include the children of some of Martin's wealthiest clients. Many of Carly's clients have self-managed superannuation funds.

Bianca Smith was originally employed as the firm's paraplanner. Bianca has completed a FASEA-approved Bachelor of Financial Planning degree, passed the FASEA exam and is currently in quarter three of her professional year as a Provisional Financial Adviser. Carly is Bianca's supervisor for the professional year.

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 BGFS. When Martin or Carly is away or on leave, you also look after and provide advice to their clients.

Scenario 2 (Brown Green Financial Services Pty Ltd)

Carly's clients from Brown Green Financial Services Pty Ltd (BGFS), Daniel and Kelly, call to arrange an appointment. While Carly is on leave, she has asked you to assist with her clients. You will be meeting Daniel and Kelly for the first time and Carly has told you they are valued clients because they often recommend BGFS to their family and friends.

Daniel and Kelly operate a successful manufacturing business, into which they've poured all their funds and time over the past 20 years. Their assets include the manufacturing business (valued at $1 million), family home ($2 million) and investment portfolio ($2 million). They also have an industry superannuation fund (balance $200,000) established when Kelly was working as a teacher. Daniel recently inherited $1 million 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 they need them.

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 wealth. 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, Daniel 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'. Daniel and Kelly explain to you that this is what Carly does for them all the time, as they are not interested in how the process works, saying 'we are good at manufacturing and we pay you good money to be good at managing our money'.

Question

(a) Briefly identify and describe a potential ethical issue that may arise from Daniel's and Kelly's minimal knowledge or experience with investing and overall disinterest in their financial plan.

(b) Discuss what you must do to demonstrate your obligations to the relevant standard(s) under the FASEA Code of Ethics, to implement advice that is in Daniel's and Kelly's best interests.

(c) Based on your meeting with Daniel and Kelly, identify and describe an appropriate ethical framework to deal with this client interaction/situation.