First appeared in Money Management, 3 November 2017
Bryan Ashenden discusses the lingering uncertainty under the incoming higher educational and professional standards and what this means for existing advisers.
Ever since the Government confirmed it would be raising the minimum education standards required to be authorised to provide personal financial advice, the question has been what will the new standards be?
While legislation had indicated that the requirement for new advisers would be at a degree level and existing advisers would need to achieve some form of equivalent status, the question still remained about what actually was required. Which courses would meet the standard? Were previous qualifications good enough? Would certain designations be sufficient? Did it matter when study was undertaken?
Interestingly, there is one major, constant theme out of all this – everyone in the industry is of the consensus that the existing RG146 qualification needs to be raised.
Pleasingly, recent announcements from the new standards body have shown that progress is being made. It has taken some time for the Financial Adviser Standards and Ethics Authority (FASEA) to be established and make its first public announcement, however getting this right is important. For FASEA to serve its purpose, it is necessary for the board to be established with the right people and experience and for the body to determine its own way forward.
FASEA needs to be seen as independent, and needs to operate as such. Many different industry groups and associations have published their views on what the future education standards should look like. While these views can help inform FASEA of relevant considerations, it will need to be open to considerations. It will need to take a critical approach as it will not be able to reasonably adopt all these views.
The current announcements from FASEA strikes an important balance. They address the most urgent issue, which is providing clarification on what it is that new entrants to the advice industry from 1 January 2019 will need to have in order to be able to provide personal financial advice to a client. The announcement confirms the need to have a relevant Bachelor degree that covers a range of fields including ethics, financial planning and advice processes, and technical requirements.
For those who already have a degree, but in a non-relevant discipline, they will be able to pursue a post-graduate pathway covering similar fields, but won’t need to undertake a full Bachelor degree.
And to make things clearer, FASEA confirmed that initially they will adopt the framework that is already in place and established by the Financial Planning Education Council (FPEC). This clarification, and use (at least as an interim measure) of FPEC’s existing framework is a positive outcome. It means that we have a list of Bachelor and postgraduate courses that FASEA will recognise as meeting the requirements for new advisers.
This certainty is needed now as those considering entering the advice industry in the future need clarity that courses of study commenced now would be appropriately recognised once completed. It means that many future advisers who are currently studying their degrees will know that they can pursue a career in financial advice with certainty in the future.
But for many, and probably for a significant number of you reading this article, the question remains about what will be sufficient for existing advisers.
FASEA has not provided those standards as yet, but is cognisant of the need to provide clarity to existing advisers. FASEA will be establishing working groups during the course of 2018 to address these relevant and important issues.
So where does this leave an existing adviser? While there can’t be any guarantees, there is at least a simple starting point. If you have completed one of the relevant degrees or post graduate courses (on top of a non-relevant degree) that FPEC have already recognised, then you can take comfort in the fact that you will meet (or be close to meeting) the future requirements set by FASEA.
Indeed, the legislation states that an existing adviser can meet the same qualification requirements as a new adviser. So if you were considering commencing more studies, again one of these courses should be sufficient.
I know many advisers are asking questions that are more related to designations, such as the Certified Financial Planner (CFP) program or the Fellow Chartered Financial Practitioner program, rather than a formal qualification, and wondering whether that will be sufficient. Again, as a starting point, look to the initial entry requirements for these programs. The CFP program, as an example, essentially requires you to have certain qualifications in order to commence.
The bigger question for me on these programs is – why are you looking to study for these designations in the first place? If it is simply because you believe it’s the fastest way to tick a box on future minimum education requirements, then you may be better off waiting for clarification. And in any event, the fastest way to tick a box is not necessarily the right approach. Arguably it is one of the reasons why we are now faced with these higher standards – because RG146 minimum requirements are a low hurdle to clear.
Rather than considering these qualifications as a way to meet the education requirements, it really helps to define you as a professional adviser to clients.
A focus on continuous improvement and professional development is an approach that should be undertaken irrespective of where FASEA’s final standards ultimately land.
Advice, if not financial services more broadly, needs to move towards being viewed as a profession. And one of the major influencers on this journey will be for all of us to actively take our own steps to lift our standards and consider going beyond (both now and in the future) whatever FASEA provides us.
The first announcement by FASEA is the first small step on the journey. But it’s the approach we all take that will give us the giant leap towards professionalism.
Information current as at update 1 December 2017. This communication has been prepared for use by advisers only. It must not be made available to any retail client and any information in it must not be communicated to any retail client or attributed to Westpac Group. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any super law considerations or comments outlined above are general statements only, based on an interpretation of the current super laws, and do not constitute legal advice. This publication has been prepared by BT Financial Group, a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian credit licence 233714.
1. CoreData What’s on Advisers’ Minds in 2016 White Paper, May 2016.
2. CoreData/StatePlus Financial Advice in the Digital Age White Paper, December 2015
3. BT Panorama Managed Portfolios White Paper, August 2015
Information current as at 1 May 2016. © BT Financial Group - A Division of Westpac Banking Corporation. This document contains material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs.