The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry understandably grabbed the headlines this week, but there are other pressing issues that continue to require just as much attention, or arguably more. Concerns over the need to get clarity on new education standards for financial planners remain as strong as ever.
The royal commission has plenty of ground to cover in a short period, and the way it manages the process will be critical to the quality of the outcome. Exactly the same is true of the work by the Financial Adviser Standards and Ethics Authority (FASEA) on education, professional and ethical standards for financial advisers.
On the face of it, the terms of reference for the royal commission won’t derail FASEA’s work because the enabling legislation for the standards authority and its work has already become law, and the inquiry “will not defer, delay or limit, in any way, any proposed and announced policy, legislation or regulation of the Government”, the terms of reference state.
So FASEA can get on with the vast amount of work needed to determine new standards and bring some certainty to advisers facing the prospect of upgrading their qualifications before the January 1, 2024, degree or degree-equivalent standard kicks in.
The situation is somewhat clear for financial planners who will enter the industry after January 1, 2019. They need to complete a degree already accredited by the Financial Planning Education Council (FPEC). Then they have to sit the industry-wide exam and undertake a professional year.
It’s more complicated for existing financial planners – those who are already on the Australian Securities and Investments Commission (ASIC) financial advisers register (FAR) or who will be on it before the end of next year. Some may have a fair bit of work to do if they want to stay in business after January 1, 2024, because the penalty for not measuring up to the new standards is being removed from the FAR and being barred from practising as a financial planner or adviser.
It’s a big job
Nailing down the specifics for both groups will take a huge effort. Personal Finance and Investment Symposium (PFIS) in Hobart on November 21, FASEA chief executive Deen Sanders underlined that fact in what was, recently at least, a rare public appearance. His presentation showed what a massive collaborative effort it’s going to take, involving every sector of the financial planning industry, to make it all happen within the timeframes set out in the legislation. At this stage, there’s no suggestion the deadlines will be moved.
Sanders’ outline of the daunting task could have been disheartening. Any one of the items on his to-do list would be a big enough undertaking. Tackling them simultaneously is, well, ambitious might be an understatement.
So while the clamour for certainty increases, let’s not forget that FASEA came onto existence only on July 1 this year, and that Sanders has been in the job only since September 18. It is unreasonable to expect the standards authority to be any further ahead than it is now. That’s not to say it should not continue with haste, but Sanders was at pains to impress upon the PFIS audience that it is not the standards authority’s job to horse trade so the industry gets easy hurdles to clear. Its job is to raise standards – to make them higher, more onerous and, therefore, more difficult to attain.
Compliance with the standards won’t be optional or negotiable, licensees and individual advisers won’t be able to fudge it. It will be a legal requirement, and failure to comply will result in being removed from the industry; therefore, it would be better for all concerned if due care and attention were given to how the standards are created and what they ultimately demand.
Obviously, it won’t be the board of FASEA that does the bulk of the work on developing the standards. Like any board, it’s there to oversee the executive, to set broad strategic direction and to ensure FASEA meets its obligations under law. The actual pavement-pounding will be done by whatever staff, working groups and other resources are established for that purpose.
Many of the issues FASEA is dealing with are tightly interrelated. Decisions on one will have flow-on effects and implications for others. It’s the Financial Planning Association’s view, for example, that the industry-wide exam should focus pretty tightly on advisers’ compliance and legal issues, leaving technical knowledge and other measures of competence to other parts of the reform, (including changes for the professional year and continuing professional development). There’s something to be said for that idea because the approach would create a single exam that can be applied to the greatest number of people, without having to address specific knowledge requirements of different planning and advice specialisations.
Sanders, among all people, understands the fundamental interconnectedness of all things, to borrow a phrase, and why rushing now could be catastrophic later. The absolute worst-case scenario is for standards to be set and then quickly revised and revised again to take into account unforeseen circumstances. It’s FASEA’s job to foresee as much as it can. That will take time, and care.
Clamour for communication
In addition to addressing the issue of actual standards, FASEA needs to find the right staff, at the right time, to handle the looming workload. There is an argument that even in its formative stages it could be doing a better job of communicating progress. The page for announcements on its website remains pretty sparse at the time of writing. There’s one from October 24 and that’s about it.
The communication issue came to the fore the day before PFIS, at the Financial Planning Academics Forum (which, like the symposium, was in Hobart) when it was suggested it was unacceptable that the media learned before the academic community did (albeit via the FASEA website) that FASEA had decided to adopt the FPEC accreditation of degree courses.
The people in the room at the academics forum will bear a large part of the burden of implementing those standards, creating courses for new entrants and existing financial planners, and possibly being involved in developing or facilitating the industry-wide exam.
It’s understandable that they want to know as soon as possible what they’re going to have to do, and it’s understandable that the broader adviser community wants clarity around future standards and the pathways to get there. But FASEA’s lack of outward communication to date shouldn’t be interpreted as a reflection of inaction or apathy. As things stand, a more haste, less speed approach is exactly what’s required.