“For the best part of a decade missing financial adviser Melissa Caddick and her husband, unemployed hairdresser Anthony Koletti, spent more than $600,000 per year funding their lavish lifestyle using the proceeds of crime, Ms Caddick’s victims allege.”
SMH, February 9, 2021
An underappreciated aspect of reforms that have swept through the financial advice industry in the past several years is that it’s become much more difficult to call yourself a “financial adviser” or a “financial planner”.
It used to be easy – literally, anyone could do it. Strictly speaking anyone can still do it, only now it’s illegal for everyone except about 21,000 people in the country. Those 21,000 people are the individuals listed on the Australian Securities and Investments Commission financial advisers register.
It all changed at the beginning of 2019, thanks to education, professional and ethical standards that started progressively to come into place from that date. From January 1 of that year the world was divided into two groups: existing financial advisers (around 28,000 of them at the time), and everyone else (about seven billion of them).
Financial advisers are a mightily exclusive group, and should be treasured as such. We all know the new standards that existing financial advisers must meet if they want to stay in the industry (and on the ASIC register), and we know the standards that new entrants must attain to be allowed in. People who are on the register and who stay on it, and those who come onto it, will have worked hard to earn their membership.
It’s sometimes easy to forget that one of the changes that took place in 2019 was a clear restriction on who can use the terms “financial adviser” and “financial planner” to describe themselves or what they do.
Under Section 923C of the Corporations Act (2001) it has been illegal since January 1, 2019, for someone who is not a “relevant provider” or a “provisional relevant provider” (or a “limited-service time-sharing adviser”, but let’s leave the time-share crew out of it for now) to use either term.
A relevant provider is anyone who is a licensee (or a director of a licensee or a related entity) or an authorised representative of a licensee, who is authorised to provide personal advice to retail clients, as the licensee or on behalf of the licensee, in relation to relevant financial products. ASIC is required to list all relevant providers (and people who used to be) on its financial advisers register.
This has been quite a long run-up to say that there’s no record of a financial adviser, current or ceased, called Melissa Caddick on the ASIC financial advisers register. Melissa Caddick doesn’t appear on ASIC’s register of banned and disqualified persons, either. On this basis we can safely say Melissa Caddick is not and never has been a financial adviser – at least, not under that name.
It’s always frustrating to see news reports about individuals who legitimately are financial advisers being pinged for doing the wrong thing; it goes beyond that when people who are alleged to have done the wrong thing are referred to as being financial advisers when they’re not.
Not only is the small percentage of financial advisers who do the wrong thing giving the rest of the industry a bad name, but now the small percentage of people who are not financial advisers and who do the wrong thing is also giving the industry a bad name.
The restriction on the use of the terms applies only to those people who use them to describe themselves or what they do. Clearly, it doesn’t stop the media from using the term indiscriminately and inaccurately to identify anyone as a financial adviser.
The same article quoted above notes later on that Caddick only “purported to be a financial adviser”, but it’s still too easy for those who don’t know about the law changes to bandy the terms around incorrectly.
Having the terms “financial adviser” and “financial planner” enshrined in law is a salient example of what the drive to raise standards is all about. Raising standards makes it harder to get into the industry and makes it harder to stay there.
In other words it makes it less likely, though not impossible, than anyone would go to the trouble of obtaining a degree or equivalent or higher qualification, sit an exam, sign up and adhere to a code of ethics and undertake ongoing professional development just so they can masquerade as a financial adviser. There are easier ways to make a crooked living.
The work it takes to become and remain a financial adviser these days deserves far wider recognition and understanding.
We know from our research that the public responds favourably when they find out about the new standards of education and ethics. In research we did last year we found close to nine in 10 (86.6 per cent) people believe financial advice should be held to the same standards of professional behaviour, ethics and education qualifications as other recognised professions.
More than nine in 10 (94.0 per cent) believe a financial adviser should have to pass an exam to test their competency in certain areas before they’re allowed to practice. Three-quarters (75.7 per cent) believe holding a bachelor’s degree or equivalent or higher qualification is appropriate and more than nine in 10 (92.9 per cent) think a professional year for new entrants is appropriate. Only three in 10 (31.0 per cent) think experience is a like-for-like substitute for formal qualifications.
But the bottom line is that when asked about the package of reforms, more than two-thirds (68.7 per cent) of people say they are much more likely or somewhat more likely to seek financial advice.
The industry – associations, licensees, advisers and others – should be screaming from the rooftops about what it takes to be a financial adviser and to remain one. And it should be putting as much daylight as possible between those who are the genuine, qualified and hard-working financial advisers and those who would only appropriate the term to suit their own grotesque ends.