With all of the rearranging of the deck chairs on the good ship Liberal Party, it will be interesting to see whether the Coalition looks at changing plans such as the Financial Adviser Standards and Ethics Authority’s education pathways for financial advisers, given new Prime Minister Scott Morrison has been happy to do away with the government’s energy policy.
If the Coalition decides to continue with and support the hard line being taken by the FASEA board they could find their chances of being re-elected are even worse than they appear at present.
The closed-minded attitude the Coalition Government has brought to FASEA and the degree requirements, and the overly bureaucratic approach FASEA is taking by requiring existing advisers to sit lengthy exams to continue in the profession, will prove to be the biggest threat to Australians getting quality professional financial advice.
An example of how out of touch the Coalition is with regard to the impact of FASEA is the reply I received to a question asked in recent months of the then-Small and Family Business Minister, Craig Laundy.
The question, which took many weeks to be answered because the response had to come via the advisers to the then-financial services minister, Kelly O’Dwyer, was as follows: “What is the minister’s view of how the degree qualification requirement for financial advisers will force many advisers out of business?”
The reply was this: “It is important to remember why these reforms are necessary – inappropriate or bad advice has significantly eroded trust and confidence in the financial advice sector. The reforms will raise the education, training and ethical standards of financial advisers and the requirements for experienced advisers to comply are not onerous in this context.”
This means the Coalition Government does not believe it’s onerous to require advisers who passed a diploma of business studies accounting, when it was the superior qualification to a degree in economics, to go back to university for two years of full-time study. Nor does it believe it’s onerous to require all authorised representatives prior to December 31, 2018, to sit a 3- to 4-hour exam and answer 70 multiple-choice questions and five written-response questions.
What is especially galling for anyone who became an authorised representative towards the end of the 1990s was that they have already had to sit two three-hour exams – one on the Corporations Act and the other on income tax, superannuation, and other financial advice areas.
Professional Planner has been tracking the progress of the new FASEA education standard requirements including the predictions of an exodus of financial advisers from the industry under current proposals.
One can hope that with a change in prime minister, treasurer, assistant treasurer, and the minister for small business, the Coalition will begin to realise that its attempts to re-establish trust and confidence in the financial advice sector will not be achieved by forcing older professional advisers, who for years have provided valuable advice designed to increase their clients’ net worth, to leave the industry.
For both sides of politics, survival often seems to be more important than doing what is right for Australia and Australians. And the Coalition may need to re-consider the hard line it is taking in that context.
Case in point, I have heard recently that the Finance Sector Union is taking an interest in those advisers whose futures are threatened by the introduction of education requirements. It may seem counterintuitive but those advisers and their clients threatened by FASEA could receive salvation by voting for a future Labor government prepared to take a more practical and compassionate approach to restoring confidence in the financial advice sector.
Max Newnham is in public practice, specialising in small business and retirement tax planning. He is an SMSF specialist and advises on portfolio construction and investments.