The passing of the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 and the appointment of the board of the Financial Adviser Standards and Ethics Authority are both good news for consumers, but could be a death sentence for older professional advisers.
The new bill resulted from concerns that the current standards relating to RG 146 compliance, which must be met to provide financial advice, were not sufficient to ensure appropriate technical and professional competence.
Given the repeated breaches by RG 146 compliant advisers that have resulted in heavy fines and conflicted advice to consumers, it’s hard to argue against the concerns that have led to the passing of the new legislation.
The legislation tackles the problem of inadequately educated and trained advisers in two ways. The first restricts the use of the terms “financial adviser” and “financial planner” to individuals who are classed as relevant providers.
The second are the three conditions placed on becoming a relevant provider of personal advice to retail clients. Those conditions include the requirement for someone to have:
- completed a bachelor or higher or equivalent qualification
- passed an exam
- undertaken at least one year of work and training, called a professional year.
When I commenced my studies to become an accountant, and wanted to work in public accounting rather than as a corporate accountant, I had two choices. One was to complete an economics degree with one of the universities, and the second was to complete a diploma of business studies (accounting) at one of the colleges of technology.
It was generally recognised that the degree courses turned out economists, while the diploma courses produced accountants. This is borne out by the fact that a person with a diploma in accounting was able to join the then-Australian Society of Accountants immediately, whereas someone with a degree had to complete two more subjects before being admitted.
To become a Chartered Accountant, in addition to obtaining the relevant qualification, three years of training had to completed with a chartered accounting firm and a professional year also had to be completed.
Given that diplomas the colleges of technology issued in the 1960s and 1970s were the equal in educational terms of degrees, and in some cases were superior, I requested clarification from the office of the Minister for Revenue and Financial Services, Kelly O’Dwyer, about whether there were grandfathering provisions that recognised the quality of diplomas the colleges issued.
Unfortunately, the reply was another example of the intransigence of government and bureaucracies: “There is no grandfathering arrangement in the Act or regulations. A diploma-level qualification is equivalent to level 5 under the Australian Qualifications Framework (AQF), while a degree is equivalent to level 7. To move from AQF5 to AQF7 requires two years of full-time study or four years of part-time study.”
Unless the minister or the board of FASEA can recognise that not all diplomas are created equal – and that those some older accountants have obtained were in fact superior at the time to the degrees universities offered – some ageing accounts will be faced with going back to university full time for another two years to continue offering strategic-based, fee-for-service financial advice.
That is a bridge too far.
Any accountants in this situation who thought their professional body would champion their cause could be in for a shock. When both of the two major professional accounting bodies were contacted for their reaction to this problem, no reply was received.
