July brings the commencement of the newly appointed Financial Adviser Standards and Ethics Authority (FASEA), which will establish the details of the new professional standards and education framework for financial planners.
The standards from the new legislation, set to commence on January 1, 2019, will radically transform the landscape and raise the bar on what is required to become an authorised financial planner in Australia. Those who do not meet and maintain the standards FASEA has set will not be able to join our profession.
In consultation with our members, the FPA is developing recommendations for FASEA to help it set standards for financial planners in the following areas:
- A new minimum CPD policy for all financial advice providers
- An approved degree for new planners and a degree equivalence standard for existing planners
- An exam and examination framework
- A professional year for new planners
- A new code of ethics for all financial advice providers.
Two big questions
The first recommendation we have been working on includes the development of a curriculum for approved degrees for new financial planners, and a mechanism to assess whether existing planners have the equivalent of a degree. This is because we hear two main concerns from our professional community. They are asking where they will find new planners and whether their qualifications are the equivalent of a degree.
Regarding the first issue, licensees in particular are looking for certainty that new planners will consistently come through the education system, given the increasing demand for advice in Australia. The FPA is well positioned to advise on these matters, as it has worked closely with the academic community to develop degrees through our work with the Financial Planning Education Council (FPEC). Undergraduate degrees are offered by 14 universities and postgraduate degrees are offered by 13 universities.
For this reason, the FPA is recommending that the students in these approved courses, and the FPEC framework, be used by FASEA as the basis for establishing both the approved degree and associated courses.
For existing planners, FASEA has a more difficult task. Every one of the 23,000 financial planners in Australia has travelled a different path to gain their qualifications. Assessing all of these against an “ideal” qualification will be virtually impossible.
Therefore, the FPA recommends that FASEA builds a framework that assigns points to each unit of study an existing financial planner has completed, based on the level of that study. This will allow FASEA to easily assess planners’ units of study and determine if the individual planner meets the required standard or needs to complete bridging courses. We’ve based this idea on a similar concept found on 100-point ID verification tests; to demonstrate degree equivalence 100 points or more would need to be accumulated.
Experience counts
While the new legislation states that experience cannot be taken into account when someone’s level of education is being considered, the FPA believes acknowledging experience is still important and valid. To address this, the FPA is proposing the completion of a professionally audited Continuous Professional Development (CPD) program, which should be recognised as an integral part of maintaining the skills and knowledge of the advice professional.
A strong and robust CPD framework acts as a cornerstone for professions worldwide, and financial planning should be no different. CPD learning is tested on a daily basis through interactions with clients.
In a profession such as ours – marked by yearly changes to law and implementation solutions – strategies to advance the clients’ financial position in their best interests can be developed only through ongoing learning programs. This is why FASEA should take the value of CPD learning into account. The FPA’s recommendations around CPD would ensure robust measurement. Points would be allowed only for CPD programs that are audited and where content is approved, the annual completion includes ethics, and records can be provided to FASEA.
During our recent FPA National Roadshows, participants were asked to provide feedback on these proposals. A total of 843 respondents took part in surveys. The results showed that 84 per cent of members agreed or strongly agreed with our proposed 100-point framework, and comments made by the remaining respondents were primarily about looking for more details before committing their support.
The new legislation will raise the bar and ensure all financial planners are held accountable to high standards. It’s my hope that it will transform our professional standing with consumers and encourage a new generation of financial planners to enter the profession.
