Education Requirements for Existing Advisers - Update

Sydney: 20 March 2018 -  Today FASEA has announced some further developments with the determination of education standards for existing advisers.  Whilst we welcome the additional clarification for some members, we would still like to see further changes to deliver better outcomes for the financial advice profession.

Please click here for a copy of their Proposed Guidance on Education pathways for Existing Advisers.
 
FASEA has also released a draft Code of Ethics for consultation until 1 June 2018.  The AFA will work through this document and provide feedback to members at a later point.  Please click here for a copy of the Code of Ethics for Financial Advisers – Exposure Draft.
 
The AFA is very conscious of the impact that the uncertainty on education standards is having on the financial adviser community.  We are also concerned about the potential for a significant loss of highly skilled and experienced advisers. These advisers are contemplating retiring early rather than complete education where they question the relevance to their area of specialisation and the cost and time impact upon their businesses and family.
 
We will argue that the final transition plan needs to place a high priority on retaining existing advisers as much as it is focussed upon raising education standards.  We will also argue that advisers should have the opportunity to do study in an area that will add value to their business and recognise their area of expertise.

Amongst the key changes announced today are the following:

  • Clarification of the three subjects that will make up the bridging course.
  • Establishment of a different category for advisers with both an undergraduate and a post graduate degree in a related discipline, who will need to do a single subject on the FASEA Code of Ethics.
  • Confirmation that even advisers who have an approved financial planning degree will also need to complete the FASEA Code of Ethics subject.
  • A requirement that all advisers with an unrelated degree will need to do an eight-subject graduate diploma, however recognition that their previous study should enable them to get more exemptions.
  • Confirmation that the age of a relevant degree will not be a factor and all relevant degrees, no matter how old, will count.

What has not changed?

The things that have not changed include the following:

  • The minimum requirement for existing advisers with no tertiary qualifications to complete a Graduate Diploma.
  • Existing advisers are still required to complete their study by the end of 2023.
  • The updated proposal does not recognise professional designations.  This is an important issue to be addressed during the consultation.  We will continue to advocate for consideration of the FChFP through greater credits towards the Graduate Diploma.  It should be noted that it does provide credits towards the full Masters of Financial Planning.

What remains unresolved?

One of the most common pieces of feedback that we have received is that advisers who are specialists, do not see the relevance in undertaking units of study and assessments in areas that are not their specialisation and they do not give advice on. Eg Risk Specialists being required to study derivatives.
 
We also continue to seek a sensible solution for older advisers who are close to retirement and cannot justify doing an eight subject Graduate Diploma.  This group are also likely to be those who haven’t studied for a long time and are feeling challenged by what has been proposed.  We will be advocating with Government and FASEA that a sensible additional grandfathering arrangement needs to be found for this group of older experienced advisers.

What does the Bridging Course involve?

FASEA has advised that the Bridging course will comprise the following three courses:

  • Corporations Act
  • FASEA Code of Ethics
  • Behavioural Finance

We can see some merit in this as a better understanding of the Corporations Act, which includes all the core obligations for financial advisers, will be of value, as will an understanding of the new FASEA Code of Ethics, which everyone will need to comply with.  We have advocated in the past on the importance of study on the application of Emotional Intelligence in the delivery of financial advice and therefore we recognise the value of a Behavioural Finance subject.  We appreciate that there will be a level of concern about mandating study in ethics, albeit no previous study on the FASEA Code of Ethics would have been undertaken.

Consultation

We appreciate that this announcement is likely to be greeted more favourably by some rather than others, such as those who have both a degree and a postgraduate qualification in a relevant discipline, however it will certainly not please others including those who have an unrelated degree.  This is particularly likely to be the case where they also have the ADFP and maybe a professional designation.
 
FASEA has advised that the consultation period has now commenced and will continue until 29 June 2018.  We encourage members to provide feedback to FASEA on their concerns with this proposal and we also welcome your feedback to policy@afa.asn.au.  For submissions to FASEA please send your feedback to consultation@fasea.gov.au.  We will continue to advocate for a more pragmatic package that does more to retain as many advisers as possible in the financial advice sector.

Education Requirements for Advisers with Different Qualifications

The following table illustrates how the FASEA requirements have changed between their December 2017 proposal and the updated 19 March 2018 version:

Education Category14 December 201719 March 2018
FPEC Approved Financial Planning DegreeNo further study required.
One subject on the FASEA Code of Ethics
 
Non-approved Financial Planning DegreeEducation Institutions can apply to FASEA for retrospective recognition
Application for retrospective recognition is assumed to remain an option or a three-subject bridging course
 

Relevant Degree (Commerce, Finance, Business, Accounting, Economics or Law)
 
Bridging courseThree-subject bridging course

Relevant Degree and postgraduate qualification (Commerce, Finance, Business, Accounting, Economics or Law)
 
Not separately addressedOne subject on the FASEA Code of Ethics

Unrelated Degree (Arts, Science, Teaching etc)
 
Bridging courseEight-subject Graduate Diploma
No Tertiary QualificationsEight subject Graduate Diploma
Eight-subject Graduate Diploma
 

What action is the AFA going to take?

The requirement to increase education standards is law.  It came after many years of demands for reform from the Parliament, regulators and the media.  The increase in education standards is going to happen.  This consultation is about the form that it takes.  The role of the AFA is to advocate for the most sensible options for our members that enables practical pathways that recognise your previous study and experience and that enables you to study subjects that will be beneficial for your business, aligned to your interests and relevant to the advice you provide.

AFA will be advocating for improvements to this package including the following:

  • An alternative solution for existing advisers with an unrelated degree.
  • An improved option for older experienced advisers that encourages them to stay in the industry rather than seek early retirement.
  • Access to Graduate Diploma programs that better align with the needs of specialists, including risk specialists, and formally recognising their specialist expertise.
  • Greater recognition of professional designations.
  • Access to cost effective solutions, in terms of course fees and obtaining exemptions.

What should I be doing?

For those advisers who have already commenced an approved undergraduate degree or a Masters of Financial Planning then we would suggest that you continue.  If you have already considered your options and decided to undertake an approved postgraduate course, such as a Masters of Financial Planning then we would also recommend that you commence.  For all advisers who have a relevant degree, you will need to wait for the bridging courses to become available.
 

For advisers who have an unrelated degree, we would recommend that you hold off commencing and await the outcome of the consultation process.

Other advisers who need to do a Graduate Diploma but would prefer to do one that aligns to their area of specialisation would be recommend waiting until there is further guidance on the expected content of the Graduate Diploma.

Ensuring a strong future for Financial Advice

We recognise this is a critical time for advisers and the financial advice profession. Raising professional standards is paramount to ensuring the community have trust and confidence in the financial advice profession.
 
We are hopeful that elements of this new proposal will deliver a level of clarity for some members, particularly those who have a relevant degree.  Whilst this won’t deliver all that might have been wanted, advisers in this group now have greater certainty.  For others, the challenges with these proposals remain.  It is important to note that this remains a proposal and is subject to consultation.  It is essential that our advice community actively engages in this process.

The AFA is very conscious that the initial announcement in December 2017 caused a great deal of concern and anxiety.  Surveys have suggested that a lot of advisers are questioning their continuation in the industry.  We acknowledge the depth of these concerns and appreciate the financial and time challenges that further study will cause.  It remains essential that we all work together and support each other through this process.  At the end of the day, it is important for the Government and FASEA to win the hearts and minds of existing advisers to choose to commence this journey.  Where the education requirements for existing advisers are pragmatic and will deliver genuine learnings of interest and benefit then we believe that there will be an incentive for existing advisers to remain actively and enthusiastically engaged in this tremendous profession.
 
The AFA will support members through this challenging time, including looking at how we can bring members together to complete study in the traditional peer group approach.  We welcome member feedback on how we can better support you in this challenging time.
 
If you have any questions regarding the education standards, please call us on 02 9267 4003.

Warm Regards,


Philip Kewin

AFA CEO