Earlier this week, we posed a question: if you haven’t passed the FASEA exam yet, do you intend to participate this year?
Just over half (about 55%) of the respondents either hadn’t registered (but intended to in 2021), were unsure whether they would or didn’t intend to participate – which in some cases was because they were planning to retire before the FASEA cutoff. Even if we can’t take those responses as indicative of the broader adviser population, a recent FASEA announcement confirms that around 35% of the advisers on ASIC’s register have yet to pass the exam.
Taking time off
There has been some speculation in the media regarding the ability for advisers to take a career break, sit the exam later on and resume practice without having to re-enter the industry from the bottom rung of the FASEA ladder. This is based on the wording in an ASIC instrument – specifically ASIC Corporations (Professional Standards—Transitional) Instrument 2018/894 – which was created before the first adviser exam was administered.
The problem with this, as acting AFA CEO Phil Anderson notes, is that this instrument is far from being set in stone. “I’m not suggesting ASIC would actually cancel it,” he says, “and it’s likely ASIC will issue a clarifying statement before long, but the fact remains that it could easily be cancelled.”
Even if ASIC can guarantee the safety of this approach, though, the risks don’t end there. For one, if an adviser intends to make use of the career break provision, they had better ensure they’re off ASIC’s register by December 31st.
“Anyone who’s on the register rolling into January without having passed the exam loses their existing adviser status,” Anderson says, “and they’d have to come back in on the new adviser pathway. What happens if your licensee doesn’t send in the paperwork in time? I think making the decision to put off doing the exam this year is highly risky.”
No way home
Beyond compliance issues, there’s another major concern: what happens to one’s clients if they accidentally run afoul of the “career break” cutoff requirements? Any adviser who’s on the register from January next year and hasn’t passed the exam will be ineligible to practice, even if they can provide support to other advisers in their licensee.
“Say you have a licensee with five advisers,” Anderson says, “and four of them have passed the exam. Maybe they could carry the load of that one adviser for three-to-six months, but that’s obviously not the case if you’re a sole practitioner or self-licensed.”
Then there’s the risk that these uncertainties make a licensee somewhat gun-shy about welcoming “career-breakers” back into the fold. “It’s highly dependent on how comfortable the licensee is with this arrangement,” Anderson says, “because they might ultimately decide you’re not suitable. I’d advise a lot of caution.”
The great unknown
Of course, there’s one key reason why the stakes are so high for advisers considering whether or not to register for the remaining 2021 FASEA exam sittings: we don’t really know any details about what the post-FASEA regime will look like. As Anderson notes, the proposed legislation outlining the distributed post-FASEA responsibilities between Treasury and ASIC hasn’t been finalised and is subject to potential changes following further consultation.
The unknowns here range from the structural – will the FSCP, which is currently convened on an ad hoc basis, be responsible for exam administration, or will it be another division of ASIC? – to the more immediate and practical, such as when future exams will actually take place. We know that FASEA contracted the Australian Council for Education Research (ACER) to oversee the exam, but we don’t know whether that contract will persist under the new arrangements.
“Say they decide that the need for doing the exam largely sits with new advisers,” Anderson says. “Then what? It certainly won’t be run as frequently as it is now. It might be months before you can sit an exam. What happens to your clients in the meantime? That could be disastrous for certain business models.”
It’s certainly cause for concern that there’s so little clarity regarding how the education and professional standards framework for advisers will actually function once it’s under new management , especially given that there are just over six months before FASEA is shut down. And if the past few years of unclear guidance, last-minute changes and confusion are any indication, advisers should definitely be wary about counting on a smooth transition next year.
Update: Senator Jane Hume has announced advisers could be granted an extension on their FASEA exam deadline into next year.
She said: “For those who have made two genuine attempts to pass the FASEA exam, and were unable, there will be a one-time, limited extension into next year. There will be at least one further opportunity to pass the exam offered in 2022 for those who qualify for the exemption. Costs, and timings for the 2022 period have yet to be confirmed.””
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