Federal Parliament recently passed the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017, which enables the formation of a financial advice professional standards body.
The standards body will be busy. In addition to consulting with an industry probably resentful of its very existence, the standards body must (after consultation):
- approve bachelor or higher degrees (equivalent and relevant qualifications)
- approve the exam
- set the requirements for work and training
- set the continuing professional development (CPD) requirements
- specify a word or expression to refer to a provisional relevant provider
- make a Code of Ethics.
The exam and apprenticeship requirements may, for the standards body, prove to be the equivalent of a land war in Asia but at least there are precedents for those upon which to draw. There are also laws, and statements of legislative intent, on which to rely to impose change.
The issue of CPD, however, is a trifle vague. It’s clearly important. The Act imposes an obligation on licensees to determine their CPD year (calendar year, financial year or any equivalent period) and to notify ASIC of their choice. It reinforces the licensees’ obligation to monitor CPD by tying it explicitly to their obligation to ensure that their representatives are appropriately trained and competent, and it establishes an obligation on licensees to notify ASIC when their representatives fail to meet their CPD obligations.
Frustratingly, however, it doesn’t define CPD or construct adequate parameters from which we can infer the standards body’s interpretation. Instead, it’s left to the entity, itself, to determine.
Nonetheless, the standards body will have an enviable opportunity to transform our industry by changing what is acceptable CPD. It must seize this opportunity, and here are seven ways it could change CPD to improve adviser capability and competence:
- Admit that successfully answering a four-option, multiple-choice questionnaire does not prove competency.
- Accept that the current CPD regime, with content aimed too often at the lowest common denominator, is an often-pointless bureaucratic exercise that values form over substance; effective CPD should challenge and confront advisers.
- Abandon the “CPD is ABC” philosophy that promotes broad but superficial training in favour of learner-driven programs – where learners can make the choice to broaden or deepen their knowledge in relevant areas.
- Embed ethics, as contextual and practical learning, in all training material, instead of presenting it as a distinct and disconnected area.
- Use technology, such as machine learning, to help advisers identify their strengths and weaknesses and assist them in either maximising their strengths, mitigating their weaknesses or both.
- Take a more multidisciplinary approach to sourcing or developing relevant content.
- Consider whether our current approach to CPD units (pass/fail) is delivering the desirable outcomes. Perhaps CPD should be graded based on complexity. Perhaps even borderline fail on a complex unit demonstrates more competency that a brilliant pass on a simple unit.
Our industry now has an opportunity to improve its educational standards. The standards body can help with this by delivering real and effective CPD.
