RIFT VALLE UNIVERSITY

ADAMA TVET COLLEGE

Competency Title:

Apply Principles of Professional Practice to Work

in the Financial Services Industry

April 2020

Prepared and Compiled By- Robel Elala

 Apply Principles of Professional Practice to Work
in the Financial Services Industry
Introductions
Ethical issues in the financial services industry affect everyone, because even if you don’t work in
the field, you’re a consumer of the services. The public seems to have the perception that the
financial services sector is more unethical than other areas of business. This misperception persists
for several reasons; First of all, the industry itself is quite large. It encompasses banks, securities
firms, insurance companies, mutual fund organizations, investment banks, pensions funds, mortgage
lenders—any company doing business in the financial arena. Because of its vast size, the industry
tends to garner lots of headlines, many of which tout its ethical lapses.

OBJECTIVES:
Dear learner: after completing this course you will be able to:
 Apply Principles of Professional Practice to Work in the Financial Services Industry
 Identify external forces impacting on the financial services industry in carrying out activities
 Identify the main sectors of the financial services industry and the interrelationship between sectors in
carrying out activities
 Identify the roles and responsibilities of other participants in the financial services industry are identified and
considered in carrying out activities
 Collect, analyze information on relevant legislation, regulations and codes of practice is applied to the job role
 Clarify own work practice in light of relevant legislation, regulations and codes of practice and organization
policies, guidelines and procedures
 Use relevant codes of practice to guide an ethical approach to workplace practice and decisions
 Analyze information on sustainability policies, strategies and impacts on industry is obtained from a
range ofsources
 Identify environmental sustainability as an integral part of business planning and promoted as a
business opportunity
 Support work planning incorporates triple bottom line principles
 Read and understand relevant documents and reports that could impact on work effectiveness and
compliance
 Analyze, check, evaluate and organize documents, reports, data and numerical calculations to meet
customer and organization requirements

Prepared and Compiled By- Robel Elala

Lo 1: Identify the scope, sectors and responsibilities of the industry
1.1 Identify external forces impacting on the financial services industry in carrying out
activities
External Forces that may Impact the Financial Services Industry
There are main sectors in the Financial Services Industry.
1. Globalization
 Globalization is the process by which economic systems and financial markets are integrated
across the world.
 Over the two decades we have seen the rapid development technology based information
systems, communication and product delivery systems.
2. Convergence
 Various sectors of the financial services industry are referred to as separate concepts e.g.
banking, insurance and superannuation. Financial sector reform enables us to recognize the
convergence that has taken place within the financial system.
3. Technological Change
 Technology has already had a dramatic impact on all segments of the financial services
market. It has been used to develop new products, to improve the quality of existing
services, to increase operational efficiency, to lower transaction costs and to increase returns
to investors. It is likely that technology will have an even greater impact in the future.
E.g. – ATM , Internet banking Internet banking
4. Innovation
• Considerable financial innovation has occurred over the last five to ten years. Technology is a
major contributing factor to innovation.

1.2 Identify the main sectors of the financial services industry and the interrelationship
between sectors in carrying out activities
What is the Financial Services Industry?
The financial services industry represents the single largest component of all sectors in the economy.
The financial services sector is very important in the economy and encompasses a wide range of
professions and industries.
The main sectors of the financial services industry include the following:
* Accounting * Credit Unions
* Financial Planning * Bookkeeping
* Managed Investments * Insurance
* Credit Checking * Lending Services
* Finance, Mortgage and Insurance Broking
* Conveyance * Credit Management and Mercantile Management
* Risk Management * Superannuation
* Loss Adjusting * Banking
* Workers’ Compensation * Financial Markets

Prepared and Compiled By- Robel Elala

Accounting
Most people think of accountants as the people who do the annual tax return. But many accountants
never deal with taxation. Accountants are employed in private businesses, charities and government
organizations. Their job is to record the monies going into and out of the organization and to analyze
financial reports to improve the profit, correct problems in the business or make informed decisions
about a proposal affecting the financial position.

Bookkeeping
A bookkeeper is more concerned with the day-to-day operations of a business, and would:
 prepare invoices and receipts
 Bank money received and pay bills
 perhaps prepare the payroll
 Produce reports for the owner
 Reconcile the bank accounts
 File documents in a logical manner.
Insurance
Insurance is simply protection against unforeseen events. Drivers insure their cars so that if the car is
stolen or damaged in a crash the insurance company pays for repairs or replacement. Businesses,
houses and possessions can also be insured against theft, fire, flood, accidental damage, etc.
Life insurance means that when someone dies, people named in their will receive money from the
insurance company to cover their cost of living either as a lump sum or a fixed amount each week.
Typically, life insurance is used to provide an income for the family after the death of the
breadwinner.

Lending Services
There are times when people need more money than they currently have. Buying a new car, for
instance, could require $20,000 or more and if you do not have that sitting in the bank, lending
services can provide it. There are two parts to a loan: principal and interest.

Principal and Interest

The amount of the loan is called the principal and the bank, finance company or credit union lending
the money charge interest to earn their income. The interest rate is based on the amount borrowed,
the credit rating of the borrower, the purpose of the loan and the time taken to pay it back. There
may also be other fees charged by the lender.
Usually, the repayments of the loan pay the interest and some of the principal. In some cases though,
the borrower may choose an interest only loan. This means that the payments made only pay the
interest. At the end of the term of the loan, the borrower has to pay back the entire principal in one
amount, or get another loan.

Prepared and Compiled By- Robel Elala

Security
For larger amounts, the lender may want security or collateral. That is, the lender wants to have
control over some of the borrower’s assets that can be sold off if the loan is not repaid.
A common form of security is a mortgage over a house or land. This a legal instrument, and is noted
on the title deeds of the property. What it means is that any debt on the property must be paid out
before the property can be sold. The lender holds the title deeds until the loan is paid off.
If borrowers default or cannot make the repayments on a loan the lender can take their house and sell
it to recover what they are owed.

Arranging a Loan
Applying for a loan requires a meeting with the lender, some of whom will come to your home to
arrange it, or it can be done online. You will need to provide personal information whichever method
you choose. Lenders will want to know:
 Name, address and date of birth
 Telephone numbers
 Driver’s license details
 Employment history
 Income and assets (this requires pay slips or group certificates)
 Credit and other references.

Credit Management and Mercantile Management

Credit management firms are involved in commercial or consumer debt recovery. One of the risks
that lenders take is that the borrower cannot or will not pay back what they have borrowed. This may
be due to unemployment, illness or injury, fraud or bad money management.
The word ‘mercantile’ means related to commerce, business and trading. So a ‘mercantile agency’
provides credit reports on other businesses rather than on individuals. A lender would engage a
mercantile agency to report on the financial position of a business that had applied for a loan from
the lender. The lender wants to know whether the borrower is financially sound, able to repay the
loan and what risks there are in providing the loan.

Retail, Industry and Self-Managed Funds

Retail funds have a high profile due to their marketing efforts. Household super facilities to
employers along with insurance, banking and investment services.
Industry funds are owned and operated by industry groups or unions. They do not pay commissions
to sales people or advisors and their fees (how they earn their income) are generally lower than the
retail funds.

Banking
One of the biggest providers of financial services is the banking sector. Banks will look after your
money and pay you interest on that money. They will also lend that money to borrowers.

Prepared and Compiled By- Robel Elala

 The main operations of banks include:
 Keeping money safe while also allowing withdrawals when needed
 Providing cheque books so that bills can be paid and payments can be delivered by post
 Providing internet banking facilities, allowing bills to be paid and money to be transferred
 Providing personal, commercial and mortgage loans (typically loans to purchase a home,
property or business)
 Issuing credit cards and processing credit card transactions and billing
 Issuing debit cards for use as a substitute for cheques
 Allowing financial transactions at branches or by using automatic teller machines (ATMs)
 Provide wire transfers of funds overseas and electronic fund transfers
 Services like standing orders and direct debits, so payments for bills can be made automatically

Main sectors may include:

• Accounting
• banking
• credit and lending services
• credit management
• finance and mortgage broking
• financial markets
• financial planning
• insurance
• loss adjusting
• mercantile management
• retail financial services
• risk management
• personal injury management

Lo 2: Identify and apply financial services industry guidelines, procedures

and legislation
2.1 Collect, analyze information on relevant legislation, regulations and codes of practice is
applied to the job role
Researching Legislative, Statutory and Regulatory Requirements the legislation, regulation and
codes of practice discussed in this publication are non-exhaustive. Consequently, it is critical that all
operators and employees in the Financial Services Industry take steps to research the legislation,
regulation and codes of practice relevant to their sector to identify compliance requirements. Non-
compliance has the potential to result in fines, loss of custom, and deterioration of reputation,
penalties and cancellation of professional memberships. Therefore, bookkeepers must research
reliable sources of information to determine the action they should take to remain compliant.

Prepared and Compiled By- Robel Elala

Legislation in the Financial Services Industry
Legislation in the Ethiopian financial services industry acts to regulate behavior, protect consumers
and promote efficiency.
There is various legislation that applies to the financial services industry the main ones are discussed
below.
Anti-Discrimination Legislation
• Discrimination means treating someone unfairly because they happen to belong to a particular
group of people.
i. Career’s-responsibilities Discrimination: When someone is discriminated against
because they need to care for or support a child or other 'immediate family member'.
ii. Sex Discrimination When someone is treated unfairly or harassed either because they
are a woman or because they are a man. Discrimination against a woman because she is
pregnant can also be sex discrimination. Harassment is also against the law.
iii. Race Discrimination When someone is treated unfairly or harassed because of their
race, color, ethnic background, ethno-religious background, descent or nationality.
iv. Age Discrimination When someone is treated unfairly or harassed because of their age -
for example, because people think someone is too old, too young or too middle aged.
Forcing people to retire at the old retirement age is also against the law. This is called
compulsory retirement.
v. Marital Status Discrimination When someone is treated unfairly or harassed because of
their particular marital status, for example, because they are single, or married, or living
in a de facto relationship.
vi. Disability Discrimination When someone is treated unfairly or harassed because they
have a disability.

Legislation, regulations and codes of practice may include:

• Business Names legislation
• Credit directives
• Electronic Funds Transfer code of conduct
• finance law
• Financial Services Reform manuals
• Financial Transaction Reports manuals
• industry codes of practice
• legislation covering competition, prudential regulation
• occupational health and safety (OHS) legislation

2.2 Clarify own work practice in light of relevant legislation, regulations and codes of practice
and organization policies, guidelines andprocedures
The following Acts are anti-discrimination legislation:
 Anti – Discrimination Act

Prepared and Compiled By- Robel Elala

 Disability Services Act
 Privacy and Personal Information Protection Act
 Disability Discrimination Act
 Equal Employment Opportunity (Commonwealth Authorities) Act
 Equal Opportunity for Women in the Workplace Act
 Human Rights and Equal Opportunity Commission Act
 Human Rights (Conduct) Act
 Privacy Act
 Racial Discrimination Act
 Racial Hatred Act
 Sex Discrimination Act

Privacy Legislation
• For reasons best known to ourselves we cherish the principle of keeping our private affairs
“private”.
• While Common Law has established some rules in relation to the disclosure of information, a need
existed to reinforce the position with appropriate Statute Law.
• The legislation we are concerned with is:
Privacy Act
• This Act established privacy standards relating to how personal information is collected, stored,
used and disclosed by federal government agencies.
Breach of Privacy Legislation
• The Privacy Act provides rights to the individual regarding the information recorded about them,
which include the:
 Right to access their own personal credit record (a "reasonable charge" for access may be made)
 Right to request incorrect information be amended or a statement detailing the request made
added to their credit information
 Right to expect the information to be safely stored, and used by or disclosed to authorized users
 Right to expect the data to be accurate and consistent in accordance with sound practices of
record keeping and information systems management.

Corporations Law
The provisions of the Corporations Law govern financial corporations and institutions. It provides
for the:
• Incorporation of companies
• Issuing of prospectuses
• Allotment of shares and rights and the powers of shareholders
It also provides detailed requirements for the management and administration of the business of
companies including:
• Qualifications of directors and managers

Prepared and Compiled By- Robel Elala

• Calling of, and procedure, for meetings
• Provision of regular accounts and audit

Policies, guidelines and procedures may include:

• best practice guidelines
• organization and customer charters
• organization codes of practice
• complaint and grievance procedures
• customer services statements
• franchise agreements
• induction program
• industry policy documents
• industry procedures manuals
• operating manuals

2.3 Use relevant codes of practice to guide an ethical approach to workplace practice and
decisions

Ethical approach to workplace practice and decisions may include:

• conflict of interest
• duty of care
• full disclosure of remuneration and fees and other conflicts
of interest which may influence recommendations
• good faith
• guidance from supervisor
• maintaining confidentiality
• mission statements
• non-discriminatory practices
• correct use of organization:
• property
• resources
• authority
2.4 What are Accounting Standards?
• Accounting standards are authoritative statements of how particular types of transactions and other
events should be reflected in financial statements.
• Accordingly, compliance with accounting standards will normally be necessary for the fair
presentation of financial statements.
Why are Accounting Standards Required?
• Accounting standards aim to promote comparability, consistency and transparency, in the interests
of users of financial statements.

Prepared and Compiled By- Robel Elala

Ethics in the Financial Services Industry
What are Ethics?
 Ethics can be defined in a number of ways.
 Ethics can be viewed as: A set of values
Factors Contributing to an Organization’s Ethics
• An organization’s ethics are formed by many factors. Some of the factors that determine an
organizations’ ethics include:
Management behavior: an organization’s ethics is influenced heavily by the behavior of
management and the emphasis they place on ethical issues within the company. For example, is
there much effort taken by the company to explain ethical policies to staff? Are there training
programs that explain Codes of Conduct/relevant laws to staff?
Employees: they are a key part of an organization’s ethical behavior. Each individual is responsible
for themselves, however within an organization there must be controls in place that monitor the
ethical behavior of employees. Employee behavior may be influenced by a great number of factors
including:
1. Job satisfaction
2. Job reward in the form of wages and benefits
3. Relationship with peers

LO 3: Identify sustainability issues for the financial services industry

3.1 Analyze information on sustainability policies, strategies and impacts on industry is
obtained from a range of sources
3.1.1 Organization Codes, Policies and Procedures
A company’s policies and procedures are developed over time and in response to legislation, codes
of practice, industry guidelines and the company’s vision and mission statement.
A vision statement sets out the values of an organization. Values of an organization may include
statements on how customers are treated and how the organization is to respond to its customers.
A mission statement sets out how the organization is going to achieve its ‘vision’ or ‘values’.
Policies and procedures are specific to the company and its nature of business. They are a set of rules
and guidelines to be followed by employees. Best practice can be identified and referred to in the
policies and procedures that will establish standards across the company.

3.2 Identify environmental sustainability as an integral part of business planning and

promoted as a business opportunity
Planning Work and Time Management
• Planning is an essential function at every level of an organization. It allows the identification of
priorities and objectives and helps the organization anticipate change.
• The tasks an employee does are based on the goals of the team and the department. Goals are set at
different levels within an organization, as part of the performance management process. Ultimately,

Prepared and Compiled By- Robel Elala

goals should be integrated to ensure that employees are working towards supporting the mission and
overall direction of the organization.
3.3 Support work planning incorporates triple bottom line principles
Sometimes referred to as "TBL", or "3BL. Triple bottom line simply stands for
 People - This is also known as Human Capital
 Planet - This is Natural Capital
 Profit - making a honest profit than raking a profit at any cost
Triple Bottom Line reporting is becoming an accepted way for businesses to demonstrate they have
strategies for sustainable growth. The triple bottom line is a form of reporting that takes into account
the impact your business has in terms of social and environmental values along with financial
returns.
The Importance of Triple Bottom Line
This is why Triple Bottom Line concepts are so important - it's not just about commerce, it's about
civilization. It’s an ongoing process that just helps a company keep on track towards running a
greener business and demonstrates to the community at large they are working not just towards
riches, but the greater common good - and that's what consumers are increasingly wanting to see
these days Disclaimer: Printed copies of this document is regarded as uncontrolled. The version on
the website is the current version.
Green business is simply good business and hopefully before too long it will be the only way to
engage in commerce.
Triple bottom line principles encompass:
• Social
• Economic
• Environmental
LO 4: Manage • Goals of sustainability for: information
4.1 Read and People understand relevant
documents and Planet reports that could impact
on work Profit effectiveness and
compliance
Manage Information
• Efficient and effective management of information is essential in the day-to-day operation of all
businesses.
• Working in the financial services sector involves reading, understanding, analyzing, checking and
organizing documents and reports in order to meet the needs of both the organization and its clients.

Types of Information
• Information comes in a variety of forms such as minutes of meetings, memos, letters and emails,
departmental reports to management, company reports, sales figures, monthly financial reports,

Prepared and Compiled By- Robel Elala

client invoices and statements, client files and databases, personnel files, brochures explaining
services to clients, graphs, accounting records, purchase orders, delivery dockets.
• Some examples of financial documents include:
Quotation - A document specifying an offer to sell particular goods at a stated price and under
specified conditions.
Purchase order - A document used to order goods or services from a supplier. When the
goods/services are received, the invoice for the goods will be checked against a duplicate copy of the
original purchase order.
Invoice - A document sent by the supplier to the purchaser with details of the products/services and
prices. When the goods/services are received, the invoice for the goods will be checked against a
duplicate copy of the original purchase order and the details recorded.
Statement - A monthly summary of all transactions between the supplier and purchaser. These are
vital documents that should be checked against invoices and receipts.
Receipt - A document sent by the supplier to the purchaser after payment is made. Details must be
checked and recorded by the supplier in the cash receipts journal.
Processing Information
• Employees will be responsible for receiving information from management, other staff members,
suppliers and clients.
• They will also need to prepare information in a format appropriate for management, staff members,
suppliers and clients.
• Documents, reports, diary entries, and documents from suppliers and purchasers should be
carefully checked and accurately processed. This may involve checking times and dates of
appointments, the spelling of names of companies, people and products, addresses, all figures and
calculations and details in quotations.
• It will also involve cross-checking documents, for example invoices should be checked against
purchase orders.
4.2 Analyze, check, evaluates and organize documents, reports, data and numerical
calculations to meet customer and organization requirements
Storing and Retrieving Information
• All organizations need to have an efficient system for storing and retrieving information.
• This will include both electronic ("soft-copy") filing systems and paper-based ("hard-copy") filing
systems. All systems should allow quick access to the required information.
• Computer-based systems need an effective system for naming files, which must be backed up
regularly for security. The personal details of clients kept in company databases must be kept
confidential and secure.
• Paper-based systems will require secure storage for vital documents, often off-site.
• Duplicates of financial documents will be required to complete accounting records, and there will
be specific requirements for the number of copies.
• As financial source documents must be kept for seven years, it is essential that the filing system is
accessible and conforms to the organization’s requirements.
Providing Information

Prepared and Compiled By- Robel Elala

• Effective filing will ensure that employees can access the necessary information they will need
when dealing with clients, suppliers or other employees.
• It is important that employees understand what information can be provided, and which
information, such as clients' personal details and details of company activities, is private or
confidential.
Handling Financial Documents
• Employees will have to handle issue and process many different types of source documents in
accordance with their employer's security procedures.
• This may involve measures such as two employees counting cash, more than one employee signing
cheques, or two employees holding the keys to safes.
Managing Financial Information
• All forms of business are required to issue financial reports for review by stakeholders.
• Stakeholders include managers, shareholders, financiers, taxation authorities, regulatory bodies and
staff. Financial reports include the following:
Statement of Financial Position (the balance sheet), and
Statement of Financial Performance (the income statement), and
Statement of Cash Flows.

Calculations may be required for:

• bank balances and reconciliations
• forecasts of capital growth
• income expected
• insurance premiums
• interest
4.3 • payments Present information in a format
• profits forecasts appropriate for the audience
• tax Personal Development
Employees need to ensure they maximize their effectiveness and efficiency when working. This
includes developing the personal organizational and time management skills discussed earlier, as
well as problem-solving and decision-making skills.
Professional Development
In today's demanding employment environment, employees of all types must complete continuing
professional development (CPD) to ensure they have the knowledge and skills they need to offer
clients up-to-date, effective advice and to meet all regulatory requirements and standards. This is
particularly true of the CPD requirements in the financial services sector described below.
Accounting Professional Industry Associations
There are a number of accounting industry associations. These include:
National Institute of Accountants (NIA)
Institute of Chartered Accountants in Australia (ICAA)
Whilst the CPA Australia and the ICAA require degree qualifications to qualify for membership, the
NIA accepts membership from holders of an Advanced Diploma in Accounting.

Prepared and Compiled By- Robel Elala

National Institute of Accountants
The NIA accredits members with their Professional National Accountant or PNA designation. The
NIA sets standards for professional integrity through a Code of Ethics, enforced by the NIA's
investigation and discipline process. Members also commit to continuing professional education to
ensure the maintenance of professional standards and knowledge.
Bookkeeping Professional Industry Associations
Bookkeeping industry associations include:
Association of Accounting Technicians
The Institute of Certified Bookkeepers
Refer to these websites to see what the minimum level of qualification & experience is required for
membership.
Both these associations require their members to have ongoing training to make sure their skills are
current. Regularly check these websites to see if they offer any professional development training
courses that suit your needs.
The Tax Practitioners Board has a list of registered BAS Agent Associations. The Board can accredit
professional associations so that the professional qualifications and experience of their members are
recognized for registration purposes.
It is well worth your while to join one of these industry associations.
Work Performance
It is probably easier for us to point out another person’s poor performance than our own. Remember,
we are not perfect and although we may be already doing an excellent job, there is usually room for
improvement or for extending our skills and knowledge.
Examples of poor work performance might be caused by a range of factors, e.g. lack of training, lack
of skills or poor management.
Poor work performance may also be a result of absenteeism, conflict, poor staff morale, and drug
and alcohol use by staff. These can be causes or symptoms that have underlying causes.
You may have heard the term ‘performance gap’—this is basically about identifying poor work
performance and taking action to remedy it.

Feedback may refer to:

• formal/informal gatherings between team members
where there is communication on work related matters
• informal communication of ideas and thoughts on
Summary specific tasks, outcomes, decisions, issues or behaviors
Ethical issues in the financial
services industry affect everyone, because even if you don’t work in the field, you’re a consumer of
the services.

Prepared and Compiled By- Robel Elala

The public seems to have the perception that the financial services sector is more unethical than
other areas of business.
There are eight main sectors in the Financial Services Industry. As with other types of service
industries, the Finance Services Industry is in the process of changing its role from being exclusively
a service provider to becoming a seller of financial products.
• Globalization is the process by which economic systems and financial markets are integrated across
the world.
• Over the two decades we have seen the rapid development technology based information systems,
communication and product delivery systems.
• The main influence on the dollar has been the prices we attract for our commodity exports
overseas.
• Interest rate rises in the last 18 months resulted in the loan servicing costs of companies to rise.
Higher interest rates discourage further borrowing by companies and individuals, and may result in a
decline in economic growth.
The financial services sector is very important in the economy and encompasses a wide range of
professions and industries.
Insurance is simply protection against unforeseen events. Drivers insure their cars so that if the car is
stolen or damaged in a crash the insurance company pays for repairs or replacement.
One of the biggest providers of financial services is the banking sector. Banks will look after your
money and pay you interest on that money.
The legislation, regulations and codes of practice relevant to the Financial Services Industry are
enormously extensive and differ for each sector.
• Accounting standards are authoritative statements of how particular types of transactions and other
events should be reflected in financial statements.
• Accounting standards aim to promote comparability, consistency and transparency, in the interests
of users of financial statements.
A company’s policies and procedures are developed over time and in response to legislation, codes
of practice, industry guidelines and the company’s vision and mission statement.

Reference
http://www.safework.sa.gov.au/contentPages/docs/labrWritingPolicy.pdf
Other worthwhile guides can be found at:
http://www.writeexpress.com/or/employee-manual/Employee-Manual-eBook.pdf
http://www.volunteeringnthqld.org.au/volorg.pdf

Prepared and Compiled By- Robel Elala