In response to “industry concerns”, the government is seeking to relax some aspects of financial adviser standards for existing and new entrants.
As a part of its election promises based on industry “concerns”, Labor announced that, if elected, it would make changes to the financial advisory industry, including removing the tertiary education requirements for certain long-practicing financial advisers, as well as relaxing education standards for new entrants.
The Labor government has now released a consultation paper to seek views from the industry on how to implement this commitment.
Currently, under the changes made by the previous government as a result of various Parliamentary Inquires into the financial services industry, as well as the Hayne Royal Commission, in order to continue providing personal financial advice existing advisers are required to:
- hold, at most, an approved 8 unit graduate diploma by 1 January 2026;
- pass the financial adviser exam by 30 September 2022 (if eligible for the extension, otherwise by 31 December 2021);
- and undertake 40 hours of continuing professional development (CPD) per year.
Similarly under the current laws, new entrants to the financial advice profession must:
- hold an approved bachelor’s degree (or higher qualification);
- undertake a professional year;
- pass the Financial Adviser exam;
- and undertake 40 hours of CPD per year.
It is noted by the government that under the current laws, there is no pathway for advisers that enables them to meet prescribed standards relying solely on their on-the-job experience.
To that end, it is proposing to remove the requirement to undertake any additional formal study to meet educational standards for “experienced advisers”, although the Financial Adviser exam will still need to be passed.
“Experienced advisers” will be required to have had 10 years of full-time equivalent experience (does not have to be consecutive) in the 15 years between 1 January 2004 and 1 January 2019 in Australia.
In addition, they will be required to have a clean disciplinary record, which at a minimum will include not having any disciplinary actions recorded against them on the Financial Advisers Register (FAR). However, the government indicates that it will not rely solely on the FAR, as prior to 2022 the only disciplinary actions available to ASIC against financial advisers were banning orders and enforceable undertakings, both of which have a high conduct threshold.
It is therefore proposed that other indicators of adviser misconduct should also be considered, including adverse findings by AFCA, CPD compliance, disciplinary action by professional associations, or multiple instances of minor misconduct over a sustained period.
For new entrants into the financial advice profession, the government is proposing the reduce the “core knowledge areas” from 11 to 5, removing some important knowledge areas such as estate planning, insurance planning and risk management, and superannuation and retirement planning.
It will also allow education providers to self-declare that their courses teach the core knowledge areas instead of the current approach of requiring degrees to be approved. Changes are also proposed to the professional year, including integrating elements of the professional year into tertiary study and introducing a principles-based approach that places greater reliance on supervisors and licensees to ensure the professional year they offer aligns with the principles.
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Read our other Superannuation Article on what happens to your super funds if you pass away before using them. https://www.garnetaccounting.com.au/superannuation-death-benefits/