They say the business of business is relationships. This is certainly the case in financial planning – be it with the client or other professionals who support the provision of advice to clients.
A relationship that may not immediately come to mind, however, is the one with the education community. Only recently, a practitioner again asked me: “Is there such a thing as a degree in financial planning?” Perhaps even more concerning is the persistent lack of awareness of financial planning as a career pathway for school leavers and career changers. And, as a further complication, some of those who are aware of financial planning have such a low opinion of the field, based on what they have read in the media, they will not consider it as a career.
At the same time, the Corporations Amendment (Professional Standards of Financial Advisers) Bill got through both houses of Parliament earlier this month. The bill includes reforms such as compulsory education requirements for existing advisers, an industry-wide CPD framework, an examination, and a comprehensive code of conduct/ethics framework. Advisers will have to meet all of these requirements – effective on different dates for each requirement over a transition period – in order to stay on the adviser register. A new independent standards body will be established to develop and implement these requirements.
Understandably, much of the discussion to date in relation to these reforms has focused on the requirements that affect existing advisers. While many meet these requirements already, many do not. Thus, the debate and discussion over these requirements have often been colourful – with some claiming January 1, 2024, will be their retirement date. The debate online, often in response to media coverage and other commentary, has been equally interesting. With the legislation passed, however, the debate now shifts from if to how, and from framework to detail.
Effects for new advisers
Elements of the legislation that have received comparatively less attention are the provisions around future new entrants. In this regard, there are two key things to note: the education requirements kick in on January 1, 2019, for this cohort and there is a supervision requirement for new entrants from this date. Thus, the degree requirement will affect students now studying for the standard three-year, full-time degree. Yes, there are trimester models and let’s hope there are models for postgraduate career changers that will provide a shorter pathway, but the bulk of the group will probably come through the undergraduate pathway. Therefore, supply of students in the early stages of the implementation of the new standards is largely already locked in. The obvious question is whether this will be sufficient to meet the demand of growing practices, and to replace those leaving the industry.
Some will be thinking, ‘Is there such a thing as a financial planning degree, and how many of them are there? In short, yes, there is such a thing as a financial planning degree. Some universities having had such programs for a decade or longer. More recently, the Financial Planning Education Council (FPEC) established a national curriculum for financial planning degrees and has accredited 14 higher education providers that run programs aligned with these standards.
In the spirit of disclosure, you should know that I am the current chair of the FPEC. I am often asked if a financial planning degree is necessary; what about other programs like law, accounting, finance or psychology – will they count towards the new requirements? The legislation does not provide an answer to this question, as it refers to “relevant” and “equivalent” programs that the new standards body will define. The question is what new entrants in financial planning need in terms of knowledge and skills. In my experience, employers are pleasantly by how equipped and knowledgeable financial planning graduates are. Indeed, we have many employers who regularly approach us for more graduates and have done so for years.
Further to that last point, the old chestnut of students being weak in soft skills is also often raised with me. Assuming we are talking about students in FPEC-approved financial planning programs, I would suggest this perception is somewhat outdated. In recent years, Work Integrated Learning (WIL) programs such as internships, work experience, industry guest lectures, use of authentic assessment, industry-engaged academics and industry input into the curriculum have led to significant gains in this regard. Indeed, building the relationship between the industry and the educators is at the heart of FPEC’s purpose. Does this mean graduates are ready to give advice upon graduation? No. They need a graduate pathway, like in all other professions, and I have seen many firms build such pathways that work for their business.
Putting all of this together, I believe we have an issue. The combination of the timeframes set out in the legislation, the somewhat limited supply of financial planning graduates, the lack of awareness of financial planning as a career pathway (and perception issues), and the lack of established pathways for graduates into businesses will stifle the build-up of the pipeline of future talent to the detriment of all stakeholders.
So what can we do about this? To date, successful strategies have included the WIL programs referred to above, student competitions (such as the AMP University Challenge) and student prize/scholarship programs that raise both awareness and aspirations. We also need to sell the virtues of the career, map out career pathways, co-ordinate graduate recruitment and raise awareness of the opportunities that exist for graduates. Great work is already occurring in this space, but more is needed in order to meet the talent/growth demands of businesses and secure the future of the profession.
Finally, I would suggest that the education sector also has responsibilities here. More programs are needed that are delivered by staff who teach, research and engage with industry and government in the field. Too often, financial planning has been either a service discipline or non-existent, while active engagement with industry is often neither sufficiently encouraged nor supported.
Preliminary results of an ongoing research project have found that both the academic and industry communities see value in closer relationships, but both sides also note the difficulty in getting the ball rolling in this regard, for various reasons. I would simply suggest that you reach out to your local higher education provider/practitioners and find out what they are doing and consider getting involved. If you have no joy in this regard, feel free to contact me and I will put you in touch with someone! In my view, these relationships will be critical to the future of the profession.
