It's fair to say that expectations about shaking up the adviser education standards framework have been increasingly muted as the FASEA era draws to a close.
While news that the standards body would be shuttered elicited some hopeful sentiments in parts of the industry late last year, comments from Government since then have indicated that there are no immediate plans for change. And although, as we discussed recently, it's possible FASEA itself could address advisers' long-standing concerns in the few months before its powers are transferred to Treasury, we have only heard vague suggestions that this might happen.
Which is why it was encouraging to hear comments from Senator Rex Patrick during the inquiry into the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021 that now might actually be the opportunity to make some changes to FASEA's standards.
An end to one-size-fits-all
The Bill primarily concerns the creation of the Single Disciplinary Body out of ASIC's Financial Services and Credit Panel, but also establishes the distributed responsibilities between Treasury and ASIC as they pertain to advisers' educational requirements.
It's not surprising, then, that FASEA and its future incarnation represented a hot topic of discussion throughout the committee hearing. And two of the most prominent concerns that emerged during the discussion were that FASEA's education requirements and standards amount to a "one-size-fits-all" approach to financial advice and that its decisions about those standards and requirements occur inside a "black box" without any meaningful back-and-forth with the industry.
Speaking at the hearing, Stockbrokers and Financial Advisers Association CEO Judith Fox expressed hope that Treasury would have a better understanding of the "different forms of financial advice" than FASEA has demonstrated. FASEA, she argued, "treats all financial advisers as financial planners," an approach that ignores the differences between, say, someone who provides comprehensive advice on "all aspects of a client's financial circumstances" and someone who "[provides] scaled advice on a client's investments and shares."
"They're different forms of advice serving different client needs," she added. "We strongly support professional and educational standards ... FASEA, however, has only approved degrees in financial planning or with financial planning majors, with one exception—the wealth management degree from UNSW. This is in spite of the Corporations Act not requiring financial planning qualifications to be the only approved courses for financial advisers."
Back to the drawing book
Fox noted that while the legislation establishing FASEA required advisers to have a "degree equivalent," the FASEA board "narrowed the scope of the approved qualification," which demonstrated that it "didn't really understand our industry."
Given that FASEA soon won't be overseeing the implementation of the legislation, though, Fox hoped that Treasury will be open to taking a second look. After all, she said, the precedent for a more generous interpretation of what constitutes a financial advice qualification already exists in the law as it was written. By going back to where it all began, could much of the stress, confusion and disagreement during the FASEA era be wound back?
Well, as the Better Advice Bill explains, that's up to the overseeing Minister. But as Fox pointed out, this needn't be a complicated process: "At this point, this Bill proposes that FASEA be wound up and the standard setting go to Treasury under ministerial authority, so that would then be a matter for the minister to be able to determine that the degrees that are suitable for our industry can be approved. It doesn't need to go back before Parliament, because the legislation says 'degree equivalent'. It's just a matter of recognising that there are degrees that are suitable for different forms of financial advice, and that can be approved by the minister and done through Treasury."
When asked whether Fox had been given any indication that the overseeing Minister planned to do this, though, she said she hadn't.
This isn't a startling revelation: there has been a notable lack of information coming out of Government as to how the post-FASEA regime will actually operate. As we've discussed previously, these unknowns range from the structural issues being discussed in this hearing down to specifics such as when and how adviser exams will take place, and with what regularity. Regarding the matter of approved qualifications (and recognition of different types of advice), though, Senator Patrick suggested the passage of the Better Advice Bill could be the opportunity to sidestep these uncertainties.
As he explained to Fox: "I suggest this is your opportunity to put on the table on behalf of your members whether or not you are concerned as to the likely outcome post the passage of this Bill so that other Senators are aware of the issue. I say that with the view that perhaps an amendment could be drafted that, because of its relationship to the Bill, could in fact make it such that it's no longer a requirement of the Minister [to make amendments to approved qualifications], to usurp or get past any concern you may have. There may be an opportunity here to resolve the problem as the Bill passes through the Senate."
Should this occur, the advice industry will be given a degree of certainty (forgive the pun) it hasn't had in quite some time.
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