Advisers at Shaw & Partners in Adelaide question the efficacy of FASEA’s professional year and the ability of the arrangement to adequately incentivize smaller firms to take on fresh talent.
The professional year, which requires advisers to oversee 1600 hours of training – 100 of which is structured – to ensure trainee competence in technical aspects and client care, as well as regulation, professionalism and ethics, has been criticised as being too onerous and expensive for smaller advice practices.
According to Shaw and Partners senior adviser Jed Richards, the PY has merit but can be an onerous commitment for advisers. “It takes about 20 per cent of your time,” he says. “We’re busy enough as it is.”
Richards and his colleague, fellow Shaw adviser David Dall, currently have shared oversight of an associate adviser that’s “progressing well”. Yet paying for an employee that isn’t authorised to advise clients or take orders amounts to a business inefficiency, they say.
“It’s very much a training role,” Richards says. “There’s not a lot they can do so it’s very much an educational role that they’re being paid to complete.”
“It’s such a hit to an adviser’s bottom line to put someone through that training and give someone a massive leg-up in their career,” Dall adds. “If I wanted to go to Harvard and do an MBA I’d have to pay for it.”
Both advisers agree that building a pipeline of young advisers is crucial to the future of the industry. But the way things are structured, Dall says, there is nothing to stop PY advisers moving onto another firm once they’ve been qualified, which makes training them a risky investment.
“It becomes an at-risk asset, because once they’re qualified they can just do the horizontal shuffle for another 20 or 30 grand,” he says. “Then the original firm has to start again and reset the clock.”
No more deep pockets
With the institutions largely out of advice, smaller advice businesses are less able to accommodate the time and cost expense of training, Dall says. “The banks would have paid their salary and had professional development departments that ran the training modules,” he says. “That’s not something that we’re seeing any more because boutiques don’t have the capital behind them.”
That’s a problem for an industry that is tipped to eventually lose half of its high watermark of 30,000 advisers in early 2019.
“More needs to be done to make the PY workable for small advice firms,” Dall states. “If there’s a massive shortage of advisers in five years consumers will find it increasingly difficult to source quality advice.”
“I don’t mind the opportunity if there’s only 14,000 advisers,” Dall continues. “Fewer advisers and more clients can only help me. But what people need is a sustainable industry with plenty of advisers providing affordable advice.”
Fixing the pipeline
Both advisers acknowledge that the issue of adviser development is nuanced and solutions to the issues presented by the PY are not easy to find.
One, Dall ventures, could be a contracting arrangement that would require advisers to stay at their training firm for a certain period. “It makes sense but it could be tricky in terms of restraint of trade,” he says.
Another would be for government funding of subsidies to make the program more affordable for advisers.
“The other option is to set aside a few days a week for unpaid onsite training,” Richards says, adding that this would give senior advisers regular time off from training duties.