Last week, we weighed up the (very similar) proposals Labor and the Government have made with regards to walking back one of the more controversial parts of the professional standards legislation.
Details aside, both have essentially recommended that advisers with 10 or more years’ experience over the past 12 and a clean compliance record (warnings excluded) should only have to complete a unit on the Code of Ethics in order to continue providing advice. This would become the “experience pathway” within the current professional standards framework and, according to some advisers, reflects the intent and wording contained in the explanatory memorandum accompanying the original Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016.
While the reasons behind the adviser exodus over the past few years are manifold, it’s difficult to deny FASEA’s influence in this area. Given the choice between having to invest time and money in re-educating oneself – after many years (or decades) providing advice – and exiting the profession, it’s understandable why many people picked (or are still considering) the latter option.
The jury’s out on how much the proposed experience pathway would move the needle at this point, but it would likely be encouraging for many advisers to see the value of their experience recognised in the letter of the law.
However, according to new FPA CEO Sarah Abood, the pathway as currently envisaged carries the serious risk of undermining the “professionalism journey” the advice industry has been on for the past 10 years.
In a statement, Abood acknowledged that FASEA “got it wrong with its one-size-fits-all framework” but argued that the 10 years’ experience carve-out is “an insufficient foundation to meet the objectives of raising the minimum education requirements for the financial planning profession, while also continuing to build consumer confidence in the profession.”
She continued: “It’s so important to maintain the gains our profession has won and keep the trust of consumers. We cannot return to the days when a planner could technically be qualified with only a two day course, with no timeframe for that to change.”
Should the Government proceed with its plans for an experience pathway, the FPA has recommended the following changes:
- the timeframe should be changed to at least 15 years’ experience over the past 20
- it should only be available to advisers over 55 years old
- the pathway should be sunset in 10 years’ time
Abood said these changes “will help alleviate pressure being felt by experienced, skilled professional financial planners, but maintain the intent of the framework which requires financial planners to be tertiary-qualified.”
Crucially, the FPA’s position also reflects the fact that many advisers have already “invested substantially in education under the current pathways.” And it is easy to understand why some advisers might view their efforts to meet FASEA’s more onerous requirements as being in vain should this pathway be implemented in its current form.
But I suspect there remains a sizable contingent of advisers whose concerns about FASEA’s pathway framework extend beyond the amount of time and money involved – and for them, FASEA’s implicit suggestion that “being a professional” and “having an approved degree” are inextricably linked could be construed as a repudiation of their years of experience providing advice. As Clime Investment Management CEO Annick Donat put it late last year, “There’s no qualification for trust. There’s no qualification that prepares you for when a client comes to you in tears and says, ‘You’re my last hope.'”
Are the FPA’s suggested changes to the experience pathway an effective compromise? Or would you prefer that it be implemented as currently designed? Let us know.
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