If I were asked to name the single most controversial issue in the financial planning industry at the moment, I wouldn’t have to mull it over for long. It’s the value of education versus experience and, more specifically, the concern that experience no longer has currency in the planning profession.
Last week, at the SMSF Association National Conference in Sydney, the head of the Financial Adviser Standards and Ethics Authority (FASEA), Deen Sanders, made the point in a public address that experience, while important, is not the same as education.
It wasn’t a popular remark, but it was an accurate one.
Of course experience has a valid place, not only in terms of the client experience, but also in coaching younger and less-experienced advisers on highly technical concepts (Professional Planner’s regular adviser columnist, Max Newnham, will expand on this in a column shortly).
Concern was expressed at the SMSF Association conference last week that academic qualifications would not improve the client experience, which advisers said is more dependent on years of being face-to-face with clients, learning their cues and being engrossed in the application of advice.
We have to remember the end game here. Financial planning needs to become a profession, and an education benchmark is fundamental to that – for any industry.
As we know, trust in financial advice is still alarmingly low, as is the take-up rate of advice. Also, in spite of numerous inquiries and reforms in the last decade, there is little evidence the problems that have pervaded the industry have been fixed. In fact, anecdotally, there’s much evidence to the contrary.
The government has resolved that the path forward is for financial planning to professionalise, and there is no way it can achieve that without an education benchmark for those on the front lines. It is as simple as that. It is what the public has been told will happen and what it expects.
Let’s imagine for a second that the minimum education standard were dropped or applied inconsistently. What message would that send to the public? Most likely that neither the industry nor the process could be trusted.
Again, that is far from saying the value of experience is now zero. On the contrary, experienced advisers can have an expansive role in facilitating a sense of community and camaraderie in adopting new standards, being leaders in the industry’s evolution and setting positive examples for the next generation.
As Peter Kell, deputy chair of the Australian Securities and Investments Commission, told a Parliamentary joint inquiry this week, the importance of experience is acknowledged by FASEA’s requirement that new advisers complete a professional year, “in other words, a recognition that experience needs to also be built into the overall set of qualifications that are required”.
The part that I struggle to get my head around is how some advisers have come to the conclusion that education and experience are mutually exclusive. What is the harm in having both? Yes, it may be costly in the short term and require additional hours of study, but what can be gained in terms of rich and complementary subject matter knowledge is beneficial at both a personal and professional level. As Sanders said, education is never a waste.
Ultimately, it is also a core tenet of what consumers expect of their professional advisers.
It’s important not to lose sight of why this is happening, why FASEA is going down this path. It’s about your clients and your future clients. They expect it and they deserve it.