It turns out that stockbrokers might not be as bad at ethics and incompetent at basic financial advice as they would have us believe. Claimed exam failure rates of as high as 100 per cent have been challenged, with suggestions the actual stockbroker failure rate is closer to around 15 per cent across all exam sittings to date. That puts them on a par with the financial advice industry more generally.

Stockbrokers who are named on the ASIC financial adviser register are required, like all financial advisers on the register, to meet education, professional and ethical standards that come progressively into effect up to January 1, 2026. And the body that represents stockbrokers, the Stockbrokers and Financial Advisers Association, may have a point when it says the content of the exam is not relevant to stockbrokers.

But the segment of the SFAA’s membership that fits the “FA” part of the name can’t really claim the title but not comply with the same standards as all other financial advisers, which includes meeting continuing professional development (CPD) requirements, attaining an equivalent degree qualification and, of course, passing the exam.

Quite apart from its supposed relevance, non-financial-adviser stockbrokers might have objections to the exam similar to other financial advisers’, namely, the time taken and cost of studying for and sitting the exam.

In the third quarter of last year we asked financial advisers how much time and money it had cost to sit the exam. Let’s just say the results we reported weren’t met with universal agreement, even though they accurately represented the responses we received.

The main bone of contention was that the way we’d asked advisers to report the cost might have meant they hadn’t factored in opportunity cost: the money they could have made, assuming every moment they spent studying and sitting the exam was instead spent generating revenue from clients. With hourly rates of more than $300 suggested, it was argued this could be a significant sum, not reflected in the reported results.

So in February this year we asked the question again, and this time made it explicit that opportunity cost should be factored into the answer:

How much do you estimate it cost you to sit the FASEA exam?

When answering this question please consider:
– The direct cost of sitting the exam
– Direct costs of studying (e.g. courses/materials)
– Non-client-facing time spent/opportunity cost of studying for the exam – including travel to exam location (if time not allocated to study/professional development)
– Non-client-facing time spent/opportunity cost of sitting the exam – including travel time to exam location (if time not allocated to study/professional development)
– Any other costs related to preparing for or sitting the exam

At a high level these are the results, compared to the results we got last time around:

There are some shifts in the distribution of responses. Even so, more than one in five advisers still report it cost – all up, including opportunity costs – less than $1000 to study for and sit the FASEA exam. But at the other end of the scale, one in 10 advisers report it cost more than $10,000. In Q1 2021 around two-thirds of advisers say the cost has been less than $5000, compared to three-quarters of advisers who reported the cost was less than $5000 in Q3 2020.

The greatest shift is in the $5000 to $7500 band. In Q1 2021, around one in six advisers (16.8 per cent) said this was the cost to them, compared to just 7.1 per cent who reported the same cost in Q3 2020.

In addition to the dollar cost we also asked how much time had been spent preparing for and sitting the exam. Half of advisers spent less than 20 hours on it, including a quarter of advisers who spent less than 10 hours. But again, at the other end of the scale, about one in five advisers reported spending the equivalent of a full working week (40 hours) or more preparing for and sitting the exam.

If we assume all respondents accurately factored in all of the issues and costs we asked them to consider, there are still numerous reasons why the results may be so disparate. Some costs of the exam are fixed and apply equally to all advisers, while others are variable.

One of these variable costs is, obviously, the assumed value of the adviser’s time: advisers with greater charge-out rates will report a greater opportunity cost. It might be assumed that older, more experienced advisers enjoy higher hourly rates, so the cost to older advisers might be reported as relatively high.

We know from previous research that, generally speaking, younger advisers got through the exam earlier than older advisers. If, since Q3 2020, more of the older cohort of advisers has gone through the exam process then this could be a factor behind the shift in the distribution of reported costs, including for the time-cost reasons outlined above.

An adviser’s educational starting point may be another factor. Among the latest survey respondents, all advisers aged 29 or younger report they have passed the exam. Members of this cohort may have only relatively recently ceased full-time study, or still be engaged in study of some sort (acknowledging that this state is not exclusive to this age group) and take an exam in their stride.

On the other hand, less than half (46 per cent) of advisers aged over 60 report having passed the exam, suggesting they’ve either deliberately chosen not to sit it, or have sat it but not yet passed. Older advisers returning to study after a relatively significant lay-off may have found the task more onerous and time consuming, thus reporting greater costs.

The broad thrust of both sets of survey results remains the same: the experiences of advisers in terms of the cost of complying with the industry exam have been variable. It has not been as big a deal for some as it has for others. Some report an expensive experience, others report a much less expensive experience. Some report it has absorbed considerable time, while others report it has taken up only a few hours.

The key thing to note is that the experience of one adviser  – or one cohort of advisers – may bear little resemblance to another’s. That doesn’t make the experience wrong, or designed to suit some predetermined narrative about the impost of the industry exam. It’s just how it is.

Simon Hoyle is head of market insight for CoreData Research.
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