At the Professional Planner Licensee Summit in the Blue Mountains earlier this year Graham Rich stood up and fronted Louise Macaulay, head of advice at the regulator, on their lack of interest in the education standards of investment professionals. He recalls using an analogy to make his point.

“I said that there’s a lot of focus on licensees and their owners, who are like owners of restaurants, and a whole lot of focus on advisers, who are like wait staff. There’s also plenty of focus on the product providers, who represent the ingredients. But there’s absolutely no focus on the investment professionals, who are the cooks in this scenario.”

The problem, he says, is that ASIC has no idea how investment portfolios are being put together.

“They don’t know who’s spitting in the soup,” Rich says.

Rich, who was chief executive and publisher of FPG Research before selling the firm to Morningstar in 1999, now runs brillient!, the professional development company best known for its annual Portfolio Construction Forum.

Rich says that while the government is focusing on adviser education via the Financial Adviser Standards and Ethics Authority, the investment component is being ignored in the standards.

This mirrors ASIC’s lack of focus on the investment capabilities of wealth management businesses, he adds.

“FASEA is symptomatic of ASIC’s ambivalence towards the investments component,” Rich says.

FASEA’s consultation paper on adviser examinations, released earlier this month, included five proposed competency areas – none of which covered investment.

‘The heartbeat of quality advice’

Rich believes investment education standards are lacking on several levels: FASEA isn’t demanding them of advisers, ASIC isn’t requiring them of investment committees, and fund managers aren’t asking them of their employees.

“To be a business development manager for a fund company, you need no qualification whatsoever,” Rich points out.

The importance of education benchmarks for investment professionals is that they have an impact on the investment returns clients rely on for a comfortable retirement, Rich says.

“The heartbeat of quality advice ultimately comes down to the quality of the investment portfolio. You have no quality retirement expectation without it,” he argues.

He admits his views on education standards for investment professionals are self-serving, given his company provides education programs aimed at individuals with discretion around multi-manager portfolio construction. However, he points out his business interests are a product of his perceived need for attention in this area.

Rich laments that ASIC’s Macaulay, when pressed, was seemingly agnostic about the regulator’s lack of focus on investment education standards.

“Louise admitted from the stage that they had no budget and hadn’t really thought about it. That’s why FASEA doesn’t care about investments either, because they just aren’t part of the mindset.”

Rich says there is no real thinking about the role of investments from the top down.

If ASIC is meant to be involved in securities and investments, Rich argues, it should be interested in the qualifications of those that run them.

“I think it’s a disgrace,” he says.

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Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.