Since 1992, the Financial Planning Association has been changing financial planning from an industry into a profession that earns consumer confidence and trust. Over the last 25 years, we have steadily taken major steps forward in securing a better future for our profession and for Australia.
We believe better financial advice will influence the financial wellbeing of all Australians and as the chief executive of the FPA, I am proud of what we have achieved to date, and optimistic about what is yet to come.
Back in 2010, the FPA’s board proposed significant changes to the make-up of the association so that only individual financial planners would have the right to vote. In April 2011, 94 per cent of members voted for the FPA to amend its constitution accordingly. This change restricted financial planning businesses and licensees from being voting members of the FPA.
The association had previously been criticised as being too broad a church, attempting to represent the interests of parties such as fund managers and financial planning business owners that may run counter to the interests of individual financial planners. The restructuring established the FPA as the first professional association for financial planners in Australia.
The evolution of financial planning
The FPA has never been in a stronger position to work with the profession, government and regulators to raise professional standards. As we continue to navigate change, it is more important than ever that we maintain focus on the areas that matter most.
At the FPA, we believe high-quality education is an important part of building consumer confidence in our profession. The FPA has not only led the way in raising education standards for members, but also in advocating for raising education standards and ethics for all financial planners.
What isn’t widely known is that many financial planners already meet these high standards.
For example, CFP Professional members have required a degree since 2007, and new FPA members have been required to hold a degree since 2013. FPA members already subscribe to a rigorous FPA Code of Professional Practice and Code of Ethics that binds them to the central principle of putting the client first.
That’s why we were delighted about the passing of the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 by Parliament on February 7. It was a historic moment for the financial planning profession and a tremendous outcome for the Australian public. The passing of the bill gives financial planners more clarity and certainty about the future and what may be expected of them.
Education continues to be top of mind for the financial planning community, ahead of the new education standards coming into effect on January 1, 2019. The new legislation is set to radically transform the landscape and raise the bar on what is required to become a qualified financial planner in Australia.
The next steps forward
As we wait for the newly appointed Financial Adviser Standards and Ethics Authority (FASEA) to establish the details of the new professional and education framework, one thing is for sure – the financial planning profession is at a pivotal moment and there will be many positive outcomes for the Australian public.
No longer will anyone be able to become a financial planner in Australia simply by meeting RG 146 compliance through a course that can be completed in a matter of weeks. As of January 1, 2019, the minimum education requirement will be an approved degree in financial planning.
All new financial planners will also be required to complete a professional year, to ensure they have the knowledge, experience and skills to provide professional financial advice. Once they have done this, they will also be required to sit an exam, the content of which will be set by FASEA.
As for existing advisers, we have proposed that they not be forced to go back to university to gain a degree if they do not have one, but instead should be subject to a 100-point qualification checklist, where 100 points will be regarded as degree-equivalent. Our proposal also includes an approved list of courses or subjects that will have a numerical value attached to go towards making up the 100 points.
Lastly, for the first time all financial planners will be required to be accountable to a code of ethics, to ensure that each and every time they deliver personal financial advice, they are doing so in the best interests of their client. There will be a strict number of hours of training in ethics that every financial adviser in the country will have to complete.
Existing advisers will have until January 1, 2021, to pass the exam and until January 1, 2024, to reach a standard equivalent to a degree. The code of ethics will take effect on January 1, 2020, with all advisers being required to adhere to it. Those who do not have a degree or equivalent qualification will be required to complete further studies such as bridging courses (to be approved by FASEA).
The FPA’s vision
The new professional and education standards represent a turning point for the financial planning profession, and an opportunity for us to take our profession’s future into our own hands.
The fundamental shift is that individuals will be completely accountable for their continuing professional development. The obligation will be on the individual, rather than just the licensee. The licensee’s job is to provide content and time for CPD training.
The new legislation will level the playing field and ensure all financial planners are held to high standards. Those who do not meet and maintain FASEA’s standards will not be able to join our profession. This is a big win for consumers, but also for the many financial planners who are doing great work for their clients every day.
And it doesn’t stop here. As part of the professional and educational standards reform package, the government has also enshrined the terms financial planner/adviser, so that from January 1, 2019, only qualified financial planners will be able to use them to describe themselves. This will ensure clearer road signs for Australians seeking financial advice, and protect them from those who are not properly qualified.
Ultimately, professional financial planners just want to make a difference in the lives of their clients. Once the new education standards are bedded down and in place, it is my hope that financial planners across Australia can get on with the job with their heads held high. Over the next 10 years, the new standards will transform our professional standing with consumers and help win the hearts and minds of the next generation of young people in Australia who choose financial planning as their career.