Newly appointed SMSFA board member, Liam Shorte
When Liam Shorte read the standards authority’s exam proposal yesterday, his first thought was that the exam related to everything advisers needed to be preparing for by 2024.
“They’re setting it at AQF 7, which is where we need to be,” says Shorte, director of Verante Financial Planning.
Next, he noted in the proposal the absence of any mock exam, and the assertion that: “The Financial Adviser Standards and Ethics Authority (FASEA) does not intend to provide examination preparation courses.”
Shorte, a newly appointed Self-managed Superannuation Fund Association (SMSFA) board member, says this could make the exam process daunting for some advisers.
“It will scare people who haven’t done exams for a long time, especially if they don’t have a book or reference to go to,” he says. “I know people who just can’t do exams in big groups. I don’t know if there will be some leeway for people like that, where the very fact of walking into a room scares the living daylights out of them.”
Despite being an advocate for the exam – and confident in his abilities – Shorte isn’t exactly looking forward to undertaking the task.
“I always get butterflies in the stomach, but ultimately this is what we do every day,” he says.
FASEA’s draft financial adviser examination guidance states that it “may publish a recommended reading list”, but makes it clear that advisers will be on their own in terms of study materials.
“Candidates preparing for the exam should use their judgement about how to prepare and consult their supervisor in designing a plan of study based on their curriculum,” the authority’s guidance states.
The guidance outlines how the exam might be delivered, and its format, duration and marking procedures, plus the five competency areas that form the proposed curriculum:
- Corporations Act (emphasis on Chapter 7 – financial services and markets)
- The FASEA Code of Ethics
- Behavioural finance – client and consumer behaviour, engagement and decision-making
- Financial advice construction – suitability of advice aligned to different consumer groups
- Applied ethical and professional reasoning and communication.
Shorte doesn’t have any major issues with the subjects outlined. The FASEA Code of Ethics – a one-pager – should be easy, he says, and the Corporations Act is a defined piece of reading.
The behavioural finance section, however, and the financial advice construction component, could pose a few problems for some advisers.
“Behavioural finance has a lot of different streams to it,” he says. “Depending on whom you read and whose beliefs you follow, that can be a very wide-ranging subject. And I’m not clear on what they mean by ‘aligned to different consumer groups’ in the advice construction part.
“I don’t know whether they’re talking about young people, older people and retirees, or whether they’re talking about people being in SMSFs or in retail or industry funds.”
Another area of concern for Shorte – which he believes FASEA will receive plenty of feedback about – is the proposal for written responses in the exam, on top of the expected multiple-choice questions.
FASEA proposes a total of 75 questions in the exam, “split between a maximum of 70 selected response (multiple choice) questions and a minimum of five written response questions.
“Adding those short answer parts makes the costs go through the roof, because you can never move to a pure online system,” Shorte says. “If you’re only looking at five questions, what’s the point?
Not only does the written element make it more expensive, but also it brings subjective marking into play, which opens the door to disputes, and probably means results won’t be immediate.
“Written responses bring in human interaction and interpretation, whereas the multiple choice is straightforward and can be computer analysed and you get your results straight away,” Shorte says.
FASEA anticipates that publication of results will take “between four and six weeks”. The proposed overall pass mark for the exam is set at 65 per cent, with the caveat that advisers must pass the Code of Ethics knowledge area by 75 per cent and all other areas by at least 50 per cent.
FASEA has also proposed that “candidates will not be permitted any reference material [electronic or hard copy] during the examination”.
*Liam Shorte will be appearing on the panel ‘Back to School: Education Revolution for Advisers’ at the Professional Planner 2018 Best Practice Forum in Sydney, August 7 and Melbourne, August 9.
TOPICS: FASEA, Liam Shorte, Verante Financial Planning