The SMSF Professionals’ Association of Australia (SPAA) has told a parliamentary inquiry that the education and training requirements for the financial advisory industry need to be radically overhauled.
In 21-page written submission to the Parliamentary Joint Committee on Corporations and Financial Services, SPAA argues that the current system of a minimum standard of education and competencies for financial advisors via ASIC’s Regulatory Guide 146 (RG 146) has failed the industry.
“We believe this (approach) has not succeeded in ensuring that advisors have the competencies required to provide high-quality advice to consumers,” SPAA’s submission says.
“RG 146 is not a flawed concept by itself as it simply outlines the minimum requirements expected by ASIC as a guide to advisors, licensees and education providers. However, too often the industry (licensees and educators) have interpreted the minimum requirements to be all that is required to be competent.
“This compliance-based approach leads to financial advisors being pushed towards a minimum level in a race to the lowest acceptable level rather than increased and improved skills that is the underlying aim of a professional level.”
SPAA CEO/Managing Director Andrea Slattery says the organisation outlined to the parliamentary committee five key steps to establish a profession for financial advice. They are:
• Adequate and appropriate education and experience requirements;
• A co-regulatory approach to regulating financial advice;
• Requiring professional association membership for market participants;
• Maintaining high ethical and professional conduct standards in the financial advice profession that each individual must be personally accountable for;
• Establishing professional remuneration models.
Slattery says by adopting this approach the industry would be embracing a “cultural shift” that embraces professionalism to encourage higher competencies rather than the current compliance driven approach.
“To achieve this outcome what is required is a co-regulatory approach that is more appropriate to lift standards of financial advice through education and training.
“It would allow professional associations to drive professionalism by setting their members higher levels and stringent competency and training requirements.
“ASIC would approve professional associations that can regulate advisors under this framework, replacing the regulator’s need to dictate and be responsible for minimum education standards.”
She says continuing professional development (CPD), as required under RG 146, is a prime example of why SPAA thinks the current system requires radical change.
“The need to undertake CPD is currently driven by a compliance-based approach where advisors are required to undertake a certain amount of CPD over a set period.
“This results in advisors often undertaking training that maintains their current knowledge to just meet the absolute minimum rather than being extended and challenged through new learning and improved knowledge.”
SPAA believes that professional associations should be given the task of setting the CPD requirements for their members. This would ensure CPD would become more orientated to improving and challenging advisors’ skills rather than being viewed as a mere compliance requirement.”
SPAA’s submission stresses the importance of improving professional, ethical and educational standards in the financial services industry.
Slattery says: “SPAA is adamant that the professionalism within the financial services industry, especially in financial advice, needs to be lifted in order to create a robust industry that can consumers can trust and engage with confidence.
“This is particularly important as Australia shifts to an older demographic where financial advice will be crucial to ensure Australians can retire with dignity and increased self-sufficiency.”
