If you think the proposed compulsory degree requirement for financial planners will raise the cost of advice and have little impact on professionalising the industry, then new research suggests you’re in the minority on both counts.
Both of these arguments are routinely put forward as reasons for delaying or even doing away with the degree requirement for planners. For new planners, the rules are due to start in 2019. For current practitioners, including those who do not meet the new standards, the deadline has been pushed out to 2024.
It’s argued, with some foundation, that better education alone won’t stop crooks. And the cost of the additional time taken to achieve higher education standards will have to be borne by someone – consumers, of course.
But Mentor Education (which you might expect to say this) and CoreData (which has no reason at all to say this) have produced research that says 55 per cent of more than 500 financial advisers surveyed think a degree requirement will raise professionalism, and “almost none” think it will raise the cost of advice.
Remember, the status of “profession” isn’t something a group of people can claim for themselves; it’s granted by the public to that group of people. Raising education standards makes that more likely. And if a degree is a compulsory to enter the profession, new entrants will have met most of the cost themselves before they get there.
As for current practitioners, it’s highly unlikely that they will be required to attain a degree if they do not already have one; the cost of additional training and education won’t be as onerous as three years full-time study (or the equivalent thereof).
Which degree of separation?
At the Financial Planning Association roadshow in Perth on Wednesday, the chair of the association, Neil Kendall, suggested the definition of “relevant” degree might be widened. In jest Kendall said “a degree in botany isn’t going to get someone across the line to be giving financial planning advice”, but added “we understand the scope of what’s relevant will be more widely considered than what it is today – so it won’t necessarily have to be specifically financial planning”.
“It may be business, accounting, commerce-type finance degrees that will be considered appropriate for that,” he said.
That might be a mistake, and it could devalue courses that are tailored for the emerging profession. If you’re actually going to raise standards then you might as well go the whole way, and if you want to establish financial planning as a profession in its own right, then its practitioners need to possess specialist knowledge that can only be obtained through specialist study.
The Mentor/CoreData research found 75 per cent of respondents think the same thing, saying they support a specialist degree over a “related” bachelor’s degree. Almost the same number say the 24-subject specialist degree “will be the most effective at professionalising the financial planning profession” (putting to one side for a moment the sematic point that until it is professionalised it’s not actually a profession).
And 80 per cent say they “see value” in the combination of a bachelor’s degree requirement, completion of a professional year and a competency exam.
Cover tax and commercial law
The FPA roadshow heard that the Tax Practitioners Board (TPD) will approve, as part of its registration of new members, those courses it believes adequately cover tax law and commercial law; this makes perfect sense for a regulator whose concern is the quality of tax advice. The appropriate qualifications for financial planners should surely – and likewise – cover subjects and topics that are relevant to financial planning. If a commerce degree or an accounting degree doesn’t cover the requisite ground then they should not be accepted.
Of course, until and unless legislation is passed that gives them effect, education standards for financial planners remain hypothetical. As things stand, the legislation is a draft, we have an election on July 2 and who knows what the new government’s attitude will be to the current draft.
And only when the legislation is passed can the proposed standards body be established and its work actually begin on determining what the education standards should be, particularly for current practitioners and their recognised prior learning (RPL) – jargon for “experience”.
With independence comes ignorance
Kendall told the FPA roadshow that we still do not know when the standards body will be set up. And we don’t know which individuals will be appointed. Even that process presents some challenges, he said.
“A lot of these things are very fluid,” he said.
“We imagine that whichever government we have will be trying to work to those 2019 and 2024 timeframes, but as soon as the legislation is put in place the [standards body] will need to be formed, because it needs to be working very quickly on competence exams. The timeframe is very short to design these things, implement and roll them out, and test new entrants to the industry by 2019.
“And the requirements of people to join that board, as they’ve been mooted at this stage, are that they are independent. The challenge around independence is that often with independence comes ignorance. So we need people who are deemed to be independent yet understand both the educational framework and financial planning – and those who are financial planners are considered not to be independent. So there are some serious challenges for how that board it constructed, and then how it goes about constructing the requirements.”
It should be noted that the most recent draft of the education and professional standards legislation (released for limited consultation, but which Professional Planner has obtained) also seems to disqualify people representing entities who may offer education courses – that is to say many, if not all, of the people who have already spent years developing a national curriculum for financial planning degrees – from being appointed to the standards body.