Fernando (age 53) established Embolden Financial Services 25 years ago. Five years ago he brought Nadine (age 49) into the partnership. They are both owners and principals and together hold the Australian financial services (AFS) licence that Embolden Financial Services operates under. You are a senior financial adviser employed for the past three years by Embolden, with an offer for equity in the business within the next few years. With the business having experienced exceptional growth over the past 12 months, Embolden has decided they need an additional adviser. Rather than hire outside the firm, they have opted to transition their young support staff member, Elizabeth, into an adviser role. Fernando's clients are predominantly self-funded retirees, with a small number who require specialised aged care financial advice. His clients have accumulated their wealth through successful small businesses. Fernando prefers to look after his existing clients, with any new clients referred to yourself or Nadine. Nadine's clients (age 35 to 55) are successful wealthy professionals from a mix of professional backgrounds. Given their wealth, Nadine has recommended self-managed superannuation funds to a number of these clients. Elizabeth has worked in the practice in a number of support roles over the last four years while she was completing her university degree. Elizabeth graduated 12 months ago with an approved Bachelor of Commerce (Financial Planning) degree. As part of her career planning, you have agreed to supervise Elizabeth through her professional year, and she is currently in the third quarter of her professional year. You have 10 years experience as a financial adviser and are fully qualified to provide advice on a wide range of strategies and products. Half of your clients followed you to Embolden, from your previous financial adviser role. When Fernando or Nadine are on leave, you also help out by providing advice to their clients.

Russell and Maggie are both in the late 60s and have been clients of the practice for many years, mainly dealing with Fernando. They have one child, a son Peter, with whom they have a strained relationship, and they are not on speaking terms. They do however see their only grandchild, Sarah (age 22), who is Peter's daughter, on a regular basis. As Sarah is just about to complete her university degree, Russell and Maggie think it would be a good time to give Sarah $100,000, as they have significant wealth accumulated and would prefer to see Sarah benefit from the funds while they are alive. Russell and Maggie have already spoken to Fernando about how they believe the money should be managed and invested. Before telling Sarah about the gift, Russell and Maggie asked her what her financial goals are. Sarah said she wasn't sure but would like to travel overseas or save towards a deposit for her own home. Russell and Maggie insist that Sarah receives financial advice before they gift her the money, to ensure she has an effective financial plan in place. They think it would be better for Sarah to deal with an adviser closer to her own age and suggest that Elizabeth would be suitable. Russell and Maggie have always found Elizabeth to be friendly over the years and are comfortable that you and Fernando will be mentoring Elizabeth. This will be Elizabeth's first meeting (indirectly supervised) as a provisional relevant provider. You ask Elizabeth about her current plan for the interview, and she provides you with the following outline: Sarah's grandparents have already spoken to Fernando about how Sarah's gift should be managed and invested. Russell and Maggie have been Fernando's clients for a long time and have done well financially, and I'm assuming they know what they are talking about and will be able to provide Sarah with the right guidance on investments too. To save a bit of time, I've already emailed the FSG to Sarah and I'll get her to acknowledge she has received it, when I see her. The money will be given to Sarah as cash. Given that Sarah is in her early 20s, she has a long-term investment horizon, and it sounds like high-growth investments will be an appropriate solution for her. We've got some really great model portfolios of direct shares on our approved product list, which are currently generating high returns for other clients, that I can talk to her about. I am a bit concerned her grandparents may not be happy for her to put all the funds just in shares, so I may need to check with them about that. This meeting should be straightforward as we will focus just on investing the $100,000 gift and I doubt whether Sarah will need any insurance, given her young age. She will eventually inherit all of her grandparents' money anyway, and I'm sure they would look after her if anything was to happen to her in the meantime

Discuss the intent of Standard 1 and Standard 2 of the Financial Planners and Advisers Code of Ethics 2019 and analyse Elizabeth's conduct. Include in your response a discussion of whether, prior to the meeting, Elizabeth complies with the standards in her dealings with Sarah. Note to students: this question is asking you to analyse the advisers actions against compliance with Standard 1 and Standard 2 leading up to the appointment, rather than after the meeting has occurred?

Answer rating: 100% (QA)

1 Standard 1 Act with Integrity and in the Best Interests of the Client a Intent The intent of Standard 1 is to ensure that financial advisers act honestly fairly and in the best interests of their cl... View the full answer