One of the greatest dilemmas the financial planning industry faces as it prepares for new education, professional and ethical standards is how to lift its game without losing the collective wisdom and experience of longstanding advisers.
New standards will be based on formalised exam and degree-qualification requirements. For an indeterminate but presumed-to-be-substantial number of advisers, both of these standards present challenges and require decisions to be made. Some will opt to leave the industry rather than upgrading their qualifications. Some have already left.
In any changes, there are inevitably winners and losers, although that’s a brutal way to think about the wash-up of the professional standards changes. Let’s say instead there are those who are able and willing to adapt (and in fact must) and there are those who have no need to adapt – if, for example, they plan to exit the industry before 2021 anyway – or who decline to do so for other, perhaps philosophical, reasons.
To recap briefly: By January 1, 2021, all existing advisers must have passed an industry-wide exam, and by January 1, 2024, all existing advisers must hold a relevant bachelor degree or higher, or equivalent, qualification.
Failure to do either of these things will result in an individual being removed from the financial advisers register, and barred from practising as a financial planner or financial adviser, both of which terms will be reserved in legislation. There are other deadlines for other standards, including compliance with a code of ethics and undertaking approved continuing professional development (CPD), but these are the two big ones for existing advisers.
As noted, some will leave the industry as a result. This impending experience and wisdom drain will be felt in many ways.
There is the impact on the clients departing advisers leave behind. Who will look after them, and will the relationship with the new adviser be as strong as with the old?
There’s the closure of businesses and the loss of employment and livelihoods, and sometimes the loss of a business to the local economy.
There are cultural effects as well. Who will the advisers of tomorrow look up to and seek to emulate?
As disruptive as transferring client books and closing businesses can be, there are mechanisms and market-based solutions to deal with these effects. It’s the effects on availability of role models, mentors and exemplars that are more interesting. Which neatly brings us to, and provides a convenient excuse to write about, Paul McCartney.
Were McCartney a High Court justice he’d have been forced into retirement five years ago. If he were asked to sit a Higher School Certificate exam, let alone a university exam, he’d fail, because he reportedly can’t read music. Despite this, the 75-year-old icon put on a spellbinding three-hour performance in Sydney on Monday night that showcased a career spanning more than 60 years. The hair may be greying (when it’s not obviously dyed black), the voice might be getting a little scratchy at times (understandably, at this point of a 20-month tour), and there are moments as he moves around the stage that his body betrays the rigours of performing and touring for more than six decades, but as an example of how to put on a show, play to an audience and introduce interesting new material while honouring the old, there are none better. Formal qualifications be damned – this was a performance crafted from decades of experience and sheer hard work.
As the years go by, there are fewer and fewer performers of McCartney’s vintage still playing the way he does, and it’s not obvious who’s going to replace them when they’ve gone. That’s a shame. Ask yourself: if you’re a 15-year-old kid, which of the performers you’re growing up with today will you be able to squeeze yourself into a seat that’s too small for you in 60 years to watch play? Ed Sheeran? Maybe.
Rag’n’Bone Man? Little Mix? Stormzy? These are all names at the top of the highest-selling album list for 2017, the UK Official Charts website shows. Alongside them, as if to prove a point, The Beatles are in the top 20 with Sgt Pepper’s Lonely Hearts Club Band, an album that turned 50 this year. Will Sheeran’s ÷ be in the charts in 2077?
I’m not dissing all of today’s music, and I am acutely aware that I’ve started to sound like my own parents, who never understood the brilliance of Billy Squier. Undoubtedly, some of today’s performers will still be kicking around, the sheer weight of numbers will see to that. And there are plenty of bands and performers from the 1960s who disappeared into obscurity. But when the wisdom, experience and craft of the older generations begins to leach away, the younger generations are poorer for it.
Even so, every industry, every profession, every field of endeavour, be it in art or business or science, needs its elder statespeople to whom we can look to know that it’s going to be OK, aspire to emulate, and turn for guidance and counsel.
The industy has been fervently hoping that the Financial Adviser Standards and Ethics Authority (FASEA) would find a workable solution that recognises and honours older advisers’ relevant and appropriate experience, yet also leads to an appreciable improvement in standards across the board. And it looks like it’s done exactly that.
Proposed guidance issued yesterday by FASEA goes a long way to bringing certainty and simplifying (and shortening) the path ahead for those advisers whose qualifications need to be upgraded. The Minister for Revenue and Financial Services, Kelly O’Dwyer, has said before that the demand for higher standards need not necessarily mean advisers who do not already have a bachelor degree will have to go out and get one; and yesterday’s FASEA announcement gives practical expression to that.
Under the standards authority’s proposed guidance, obtaining a qualification at Australian Qualifications Framework (AQF) level 8 – postgraduate diploma level – will suffice to meet the new education standard. And an AQF level 8 qualification can typically be obtained with two years of part-time study (compared to a bachelor degree’s six years of part-time study).
A postgraduate diploma can be obtained by an adviser who already has a degree and who undertakes eight units of study covering certain prescribed areas of study at AQF 8, or graduate diploma level. But this option is also open to advisers with no current relevant qualifications if they undertake a postgraduate certificate course first – which can be competed in one year, part-time – and for many advisers their existing experience may be enough to get them in to the certificate course and on the pathway to the postgraduate diploma qualification.
This massively opens up the options for existing advisers, who under this proposed guidance will have until 2024 to complete a two-year part-time course. It may make the difference between a significant number of advisers meeting the new standard, and not meeting it; and therefore it may also mean a large number of advisers’ wisdom and experience will not be lost to the industry after all.