I had a conversation recently with someone applying for a licence with ASIC [the Australian Securities and Investments Commission]. They presented all their education qualifications, including their degree and Certified Financial Planner (CFP) designation, and so on – and they had been practising for 12 years – and the question that ASIC asked was: are you RG146-qualified?

Professional and education standards are a hot topic at the moment for all of us. The framework that’s proposed has, smack-bang in the middle of it, a new independent body. ASIC does not have the will, does not have the expertise and does not have the resources to run the education register like it used to. The list of approved courses has been abandoned now for three or four years. This independent body is going to take that role.

The independent body is going to be the holder and gatekeeper of education going forward. It will develop the curriculum; it will approve the universities or education providers, that have courses that meet the curriculum; and they will audit those courses of those education providers as well. And it will keep a register.

As an employer you will be able to see, if a person tells you they have done a course, that the course is listed and approved by the new independent body. So that’s going to make life easier.

Powerful body

But the independent body is going to do a lot more than just that. It’s going to look at a whole range of things, including the professional year, and what the professional year is going to look like, and an industry-wide standard for the professional year.

It’s also going to look at the registration exam – what the exam is going to be about, and who’s going to have to do it. And effectively, it will also set a continuing professional development (CPD) policy, including the minimum CPD requirement.

You’re all currently obligated to complete ongoing professional development, but ASIC does not tell you what the minimum requirements are. For the first time there will be a minimum CPD standard for the whole industry.

The independent body will also develop the criteria for what a code of ethics should look like. Again, one of the proposed requirements is that everybody will need to become subject to a code of ethics. For FPA members, you are subject to a code of ethics; but it’s not compulsory [that non-members are subject to a code] – it’s voluntary. For the first time, every practitioner will be subject to a code of ethics in the new regime.

But effectively, just to complete the circle, you’ll need to have a degree, complete a professional year; you’ll need to be subject to a code of ethics and pass an exam; you’ll need to do ongoing CPD; you’ll then be listed on the ASIC register; and then, as a result of all that, you will be able to legally use the term “financial planner” or “financial adviser”.

Anybody who doesn’t meet those criteria and uses the term “financial planner” or “financial adviser” is doing something illegal. Those persons can be prosecuted for misrepresenting themselves – as of today there is no power to do that.

How to find an independent ‘independent body’?

As for the independent body itself – who’s going to be on it, what’s the make-up going to be – these are still questions that are open-ended. We’re looking at nine representatives that are going to be put on the board. Originally, the responsible minister was going to appoint only the independent chair; now the minister is going to appoint the whole board. There will be representatives from industry, there will be representatives from education, there will be representatives from consumers, and an ethicist as well.

One of the issues we’ve got is they all have to be independent – they cannot be office-holders. They cannot work for anyone in the industry; they cannot work for an education provider. It makes it a bit difficult to find somebody with expertise who’s not actually in the industry or in the education field. Common sense needs to prevail there, in that respect.

The important thing is that there are four key criteria that a new financial planner will need to meet, in order to be deemed able to practise in the new regime: a degree as approved by the independent body; complete a professional year, as prescribed by the independent body; complete or pass a registration exam; and be subject to an approved code of ethics. If you tick those four things off then you’re able to practice in your own right as a financial planner.

This will remove any opportunity for the media to start fighting those six-day courses and quick-and-cheap ways in which people become financial planners. It is now impossible for somebody to become a financial planner without having to do some pretty stringent work. And in fact I would go so far as to say this is a greater barrier and greater roadblock than becoming an accountant, and it’s up there with the legal fraternity as well, in terms of the components, and in terms of the requirements. So it is very stringent and it’s going to make financial planning as a profession, one of the leaders, in terms of the process of getting in.