RG146 has its critics as well as its advocates. But as education of financial planners evolves, it’s likely to become a far less relevant industry standard. Krystine Lumanta reports.
If we were issued drivers licences without the need for a test and completed hours, driving would no longer be a privilege. And if the RTA and the police stopped enforcing speed limits, we’d be free to drive like maniacs.
Shortcomings in licensing requirements and poor policing are obvious to road users. Exactly the same issues plague the financial planning industry and the operation of Regulatory Guide 146 (RG146).
Slack enforcement has resulted in large gaps and variations in training standards. Courses are often offered on a “shortest and cheapest” basis, with some training providers “going rogue” and offering the qualification in as little as eight days.
There are growing calls for the industry to abandon RG146 altogether, as any kind of minimum requirement for participants. But while regulators still require anyone practising as a financial planner to attain RG146, the industry is stuck with it.
A spokesperson for the Australian Securities and Invest- ments Commission (ASIC) says: “Informal discussions with industry stakeholders about the effectiveness of the training in RG146 is being conducted.
“We recognise the need to continually review and refresh our guidance and aim to ensure members of the industry pursue professionally relevant programs and credentials,” the spokesperson says.
“At this stage, no changes to the policy are planned.”
It appears that ASIC believes RG146 remains adequate at this point in time. So for the foreseeable future, the low entry requirements dictated by RG146 will continue to stand in contrast to the high entry requirements of other professions.
Tim Steele, director of AMP Horizons Financial Planning Academy, believes RG146 is a reasonable standard only as an entry point as “its inconsistent application by registered training organisations (RTOs) makes it unreliable”.
The Horizons academy was set up in 2007 as a strategic initiative to help recruit and place financial planners within the AMP planning networks, and to make sure graduates are adequately educated and trained.
“We do not have confidence in RG146 as a qualification,” Steele says. “So we require any applicants to Horizons to complete a technical assessment as part of their application process.”
Steele says training providers are creating variations in education, rather than establishing an industry-wide standard.
“There are some that offer very exhaustive training packages to students; then there are others that offer a less than robust solution or training program,” Steele says.
“For a true career-changer, who’s never been a financial planner, we really believe and encourage all candidates to complete a RG146 training program that is rigorous,” he says.
Steele believes that amongst the arguments for and against RG146, there is a basic solution.
“We fundamentally believe there should be external assessment of RG146 with oversight from ASIC [who] should take responsibility for administering the assessment of the qualification across the entire country,” he says.
“It should work just as it does in the US. The National Association Of Securities Dealers (NASD) is the authority responsible for dealer groups in the US and they’re also responsible for the individual securities licensing of financial advisers. They administer all tests that relate to securities licensing and it should work the same way here.
“RTOs should be responsible for delivering the appropriate curriculum and training to help the development of their candidates and students and they would then send them out to then complete a test that’s administered by ASIC.”
Noel Maye, chief executive officer of the Financial Planning Standards Board in the US, says having RG146 is better than having no entry standards at all.
“At least in Australia you’ve got something,” Maye says.
“It’s true in the sense that around the world there’s plenty of variability in what people have to do or not have to do to provide advice and products. Looking at what you’ve got here, to some extent the job of the government is to set a threshold – a minimally accepted threshold. So while there’s some who may feel RG146 is too low, there’s probably people who are failing to get in at that level. So at least it’s keeping some people out.
“Right now in the United States, to be an investment adviser representative you have to take a competency exam, and it’s significant. Our certification helped the securities group develop it. Prior to that…as long as you could pay money, and breathe, you’d get registered.”
Maye says that “to a certain extent I would say you definitely don’t want the standard for someone self-identifying as a financial planner too low, because that doesn’t make a whole lot of sense if this person is supposed to be this competent professional who can advise holistically”.
Within the arena of RTOs, the majority rejects RG146 as a minimum threshold, recognising that it is not the only component to compliance. They also agree that there is not enough being done by ASIC to police RG146.
John Prowse, managing director of Pinnacle Financial Services Academy, says that now is the time for a new industry standard because “without its enforcement, RG146 is irrelevant”.
“Where are the regulators? Someone at ASIC needs to start taking an interest in this,” he says.
“There’s nothing wrong with having a standard, but is it at the right place? And is it even the right standard to begin with?” Training providers want
RG146 expanded to incorporate a higher benchmark, such as an Advanced Diploma in Financial Services or tertiary education at a university, in conjunction with future education and training.
But there are opposing views on how to increase the quality of education provided by training providers and how this level can be maintained.
The solution – supported by Steele – that continues to emerge in compliance debates is the introduction of an external nation-wide assessment. As there is no formal central assessor under RG146, RTOs have been self-assessing their students.
Prowse continues to encourage the exam, having brought it to the media attention last year, and says ASIC can take control by issuing an objective assessment which in turn will finally create what has been lacking in financial planning education – a measureable standard.
“All students would study toward an ASIC-set exam and thereby, those that were taught in eight days would certainly fail,” he says.
Dr Mark Sinclair, managing director of Mentor Education, which owns RG146 Training Australia, says he’s waiting for the industry to adopt a code similar to that in New Zealand, whereby authorised financial planners undergo regular training and assessment in order to maintain competence.
Better requirements will remove conflict of interest, and competency will not have to be called into question, Sinclair says.
“Regulated guidelines should still apply, but it needs to be expanded,” he says.
“I think the real debate is about ASIC having diploma level courses and whether…the education standard that ASIC regulates should be increased to advanced diploma level or higher.
“My view is that ASIC should increase the minimum requirement; and also, in a lot of other industries, it’s mandatory that you’re a member of industry associations, and I’d like to see that happen. The remaining 20 per cent in the industry will only do what’s required of them if it’s mandated, so I think that ASIC needs to continue to mandate the minimum requirement for advisers.”
Lindsay Rowlands, managing director of the Australian Institute of Financial Services and Accounting (AIFA), disagrees with the call for external exams.
“It’s not the solution. It sounds appealing but it’s not a matter of having another method of assessment. I think the solution is simply in the managing of training,” he says.
AMP’s Steele says that if RTOs are confident in the quality of the output of their program they should have no concern about their students completing an external exam.
“I would believe that the good providers would be shouting from rooftops in support of this because it would help them differentiate themselves from the lower quality players in the market,” he says.
Rowlands says RG146 will remain unchanged as long as there are “students who just want to fly through [the training], amongst those who are genuinely interested in their pursuit”.
“There’s an ongoing battle to improve the standards, but they [RTOs] think it’s not their problem, they just have to comply with the law; so as long as the adviser gets the certificate, the training quality will remain low,” he says.
“The market allows it and the regulator doesn’t do anything.”
