This week the Financial Adviser Standards and Ethics Authority (FASEA) updated its guidance on how existing advisers can raise their academic qualifications to meet a new minimum education standard. It’s provided a clearer picture of just what needs to be done by all advisers to reach the standard by January 1, 2024.
The worst-case scenario is clearly for advisers currently with no academic qualifications at all, little or no prior industry experience and no professional designations or industry-based education. They must complete an approved graduate diploma – in academic-speak, that means eight units at level eight of the Australian Qualifications Framework (AQF8) – before January 1, 2024, and won’t get any credit towards it.
The path to meeting the new standards gets progressively shorter depending on an adviser’s current qualifications and experience. But experience, while important, is not a direct substitute for a formal qualification, so it’s not equally weighted in terms of what counts. But it does make sense that the least academically qualified and least experienced advisers have the longest path to traverse, and those with greater experience have a slightly easier journey.
The aim is to raise all advisers to a broadly similar level by the 2024 deadline, so that consumers can have confidence that there’s consistency in practitioners’ formal qualifications, right across the industry. It will be the first time that’s ever been the case, and don’t underestimate the impact that will have on public perceptions of advisers and the industry.
The aim of the new education standards is to actually raise the bar. That’s the intent of the legislation that gives force the changes, and that’s the intent that has been expressed on numerous occasions by the Minister for Revenue and Financial Services, Kelly O’Dwyer. Lifting education standards was never meant to be an exercise in grandfathering as many existing advisers into the new regime as possible.
However, education standards are not an end in themselves, but rather are one part of a means to an end – namely, getting more advice to more Australians by fostering greater confidence and trust in advisers and the services they offer.
Raising advisers’ education standards in isolation won’t do that, and that is why FASEA is working on a range of changes that includes a new code of ethics for all advisers (also released this week), an industry-wide exam, and new continuing professional development (CPD) requirements.
O’Dwyer said this week the government created FASEA to raise standards in response to “repeated instances of inappropriate or just plain bad advice” that had undermined trust.
“Every adviser has a role to play in rebuilding that trust, and these new educational requirements are a critical step towards professionalising the sector,” she told the Australian Securities and Investments Commission’s annual forum in Sydney.
“Ultimately, the professionalisation of the advice sector will be in the best interests of all advisers, existing and new, because it will ensure enduring consumer trust and confidence in the financial advice sector.”
A lack of trust and confidence in advice is a major social and economic issue in an environment where more and more people will need to become financially self-reliant in retirement, but lack the basic financial knowledge and skills to achieve that on their own, but at the same time are reluctant to seek advice.
Professor of Finance at Griffith University, Mark Brimble, says that up to 80 per cent of people are likely to fall short of enjoying a comfortable retirement, so getting “more people into a financial advice relationship” is integral to reducing reliance on the Age Pension and helping more people become self sufficient.
In a special Thought Leaders miniseries, Brimble, who is also a board member of FASEA, says making people aware of what gets in the way of making good financial decisions, and the value an adviser brings to helping them avoid those mistakes and achieve their goals, is part of a broader conversation that’s needed about how best to deal with “the colliding forces of an ageing population, the maturation of the superannuation system and people’s desires to live healthily, happily and long into retirement”.
Brimble says these issues need to be tackled on multiple fronts, and nurturing the development of financial advice as a profession by raising education standards, among other things, is one of them.
The multiple routes to the new education standard sound complicated, but in reality the structure is entirely logical. If you think of the path to the 2024 deadline as a highway, all that’s happening is different advisers are being allowed on to the same highway at different places, at different distances from the destination. They’re all headed to the same destination, but to work out how far any individual adviser needs to travel they need to know where they’ll be allowed onto the highway. There are five broad entry points, depending on existing qualifications.
No degree: The route covers eight units at AQF8, with credit for recognised prior learning (RPL) based on experience, industry designations and industry-based education. Exactly what will be covered in the eight units will be finalised before the end of this year, but it will include the topics covered in bridging courses (see below).
Unrelated degree (any degree that’s not on the “related” list, below): The route covers eight units at AQF8, but probably with greater credit for RPL than for advisers who have no degree.
Related degree (accounting, financial planning or advice, business, commerce, law or economics): The route covers a bridging course of three units at AQF8, covering three broad topics: financial services and markets; behavioural finance, client and consumer behaviour, engagement and decisionmaking; and the FASEA code of ethics.
Related degree plus related postgraduate qualification: The route covers a bridging course of one unit at AQF8, specifically covering the FASEA code of ethics.
Approved degree: As above, a bridging course of one unit on the FASEA code of ethics, at AQF8.
As the ASIC forum this week the chief executive officer of FASEA, Deen Sanders, said education standards are one of the primary “engines” that will drive professionalisation of financial planning. The other is the code of ethics.
Sanders says consumers have the right to expect that anyone holding themselves out to be a professional meets minimum education and ethical standards – or “to know certain things and…to act in certain ways”.
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