Moral Development of Financial Advisers in Australia

Dr Michelle Cull, School of Business
Research Project (Women’s Fellowship Grant 2021)

Aims and Background

The Parliamentary Joint Committee (PJC) on Corporations and Financial Services (2009) and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2019) have led to a raft of legislative changes that require financial advisers undertake additional education, and abide by a national code of ethics (FASEA 2020). The education requirements include a compulsory ethics course and a national ethics exam. While some argue that a national exam will be insufficient in ensuring ethical behaviour (Breakey and Sampford, 2017), Francis (2000) suggests that codes of ethics should try to achieve the highest categories of moral development. Thus, it is pertinent that the moral development of financial advisers in Australia is investigated further. The moral reasoning component can be measured by Rest’s Defining Issues Test (DIT) (Rest, 1986; Rest, Narvaez Thoma and Bebeau, 1999) which is adopted in this study.

The aims of the project are to:

  • determine the moral development of financial advisers in Australia;
  • clarify how the new educational and ethics requirements have influenced ethical awareness and the moral development of financial advisers;
  • build a database for longitudinal studies and comparison with other professions;
  • provide practical feedback to financial advisers regarding their moral development;
  • provide empirical data to policy makers as to the impact of regulatory changes aimed at improving the ethical behaviour of financial advisers.

Impact, Significance and Innovation

While there are numerous media reports highlighting the bad behaviour of a small proportion of financial advisers, academic research on the moral development of financial advisers in Australia is currently limited. This study will therefore clarify how the new educational and ethics requirements have influenced ethical awareness and the moral development of financial advisers. Further, the study will provide financial advisers themselves with feedback on their moral development score and allow them to reflect on what this score means for them and their perceptions of its accuracy. The research will also provide evidence of the moral development of advisers that may be contrary to that previously reported by the media and if so, may help to shape and inform the future of financial planning in Australia as a profession, with the ultimate goal to increase consumer trust in financial advisers and meet Australia’s economic objective of increasing the number of consumers participating in the economy.

Participating in this Research

Financial Advisers who are currently registered on the Australian Financial Adviser Register are encouraged to participate in this research. For more information, please see the Participant Information Sheet (PDF, 149.62 KB) (opens in a new window).

By participating in this research, you will be asked to complete an online survey which will ask some questions about how perceive the new ethics education requirements have influenced your ethical awareness and moral development. The survey will also include questions from the Defining Issues Test (DIT) (Rest 1986) to calculate your Principled Morality Score (see below for more information about this).  You can choose to receive your Principled Morality Score (the ‘P’ score) via email and/or post along with a written explanation of what your score means. The P score will be presented to you in the form of a certificate. Once you have received your P score, you will be asked to reflect on your score and provide feedback via a second online Qualtrics survey.

Please go to Moral Development of Financial Advisers - Survey (opens in a new window) to participate in the study.

References

Breakey, H. & Sampford, C. (2017). National Exams as a tool for improving standards: Can Australian financial advisers take leaf from the professionals, UNSW Law Journal, 40 (1), 385-410.

Commonwealth of Australia 2009, Parliamentary Joint Committee on Corporations and Financial Services: Inquiry into financial products and services in Australia, November 2009.

Commonwealth of Australia 2019, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report, 1 February 2019.

Financial Adviser Standards and Ethics Authority (FASEA) 2020, FASEA’s Standards - An integrated framework. Retrieved from FASEA's Standards - An integrated framework (opens in a new window).

Francis RD 2000, Ethics and Corporate Governance: An Australian Handbook, University of NSW Press Ltd, Sydney.

Rest J 1986, Moral Development: Advances in Research and Theory, Praeger Publishers, New York.

Rest J, Bebeau M and Volker J 1986, ‘An Overview of the Psychology of Morality’ in Rest (Ed), Moral Development: Advances in Research and Theory, Praeger Publishers, New York.

Rest J, Narvaez D, Thoma S and Bebeau M 1999, ‘DIT2: Devising and Testing a Revised Instrument of Moral Judgement’, Journal of Educational Psychology, vol 91 (4), 644-659. DOI: 854607681.

This information has been contributed by Dr Michelle Cull, School of Business, Western Sydney University. Dr Cull can be contacted at m.cull@westernsydney.edu.au