Legislation mandating new education, professional and ethical standards for financial planners has been introduced into the parliament by the Minister for Revenue and Financial Services, Kelly O’Dwyer.
The legislation also establishes a standards body that will over see development of the new standards and which will also develop an industry-wide code of ethics that all financial planners must adhere to in order to remain listed on the ASIC Financial Advisers Register and to remain n practice as financial planners.
No announcement have been made on the composition of the nine-person board of the standards body. The body will initially be funded by the banks.
New education standards for people entering the industry come into effect on January 1, 2019. New standards for existing planners come into effect on January 1, 2024. Between those dates, it will become mandatory for exiting planners to comply with the code of ethics and to sit an exm. The minister has previously said there will be no exemptions from the exam.
The Minister’s full statement:
PROFESSIONAL STANDARDS FOR FINANCIAL ADVISERS INTRODUCED
The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, today introduced legislation into Parliament to mandate professional standards for financial advisers.
The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 includes:
• Compulsory education requirements for both new and existing financial advisers;
• Supervision requirements for new advisers;
• A code of ethics for the industry;
• An exam that will represent a common benchmark across the industry; and
• An ongoing professional development component.
Currently, ASIC guidance sets out the minimum knowledge, skills and education standards for financial advisers. Both the Financial System Inquiry and the Parliamentary Joint Committee raised concerns with the current standards, and questioned whether they were appropriate to ensure that advisers were professionally competent.
“The current requirements have allowed some financial advisers to become qualified to provide financial advice to retail consumers after only four days of training. There is also no specific requirement currently for advisers to undertake continuous professional development. The Government’s reforms will significantly increase the education, training and ethical standards of financial advisers, who will need to be qualified to a standard equivalent to a degree,” Minister O’Dwyer said.
The new professional standards regime will commence on 1 January 2019. From this date, new advisers entering the industry will be required to hold a relevant degree. Existing financial advisers will have access to transitional arrangements, allowing them two years, until 1 January 2021, to pass the exam, and five years, until 1 January 2024, to meet the education requirements. The transition period recognises that existing advisers may need to complete the education requirements on a part-time basis, while continuing to service their existing clients.
The government will establish an independent standards body, as a Commonwealth company, to administer the regime. From the date of establishment until the regime commences on 1 January 2019, the body will be responsible for developing and setting the industry exam, developing the code of ethics, and setting the education requirements, including working with education providers to establish appropriate courses. The body will develop the exam, the Code, and the standards in accordance with international best practice and will consult broadly with stakeholders throughout this process. The body will be funded, both initially and on an ongoing basis, by the industry.
“These reforms will deliver significant benefits to consumers by building trust and confidence in the financial advice industry, by ensuring that people have access to financial advisers who will put their interests first, and who are professionally competent and ethical,” Minister O’Dwyer said.