Stakeholders are voicing concern that Labor’s proposal to repeal existing education standards and exempt advisers with ten years experience from the equivalent degree requirement could stall the industry’s journey to professionalism and undermine consumer trust hard won in the wake of the Hayne royal commission.
Since ALP shadow financial services minister Stephen Jones announced the party’s plan to roll back the education standards, debate has flared around the merits of carving out the degree requirement for experienced advisers.
The proposal does have the potential to alleviate the adviser exodus. Only around 19,000 advisers are on ASIC’s register, down from a (somewhat artificially inflated) high of 30,000 at the end of 2018.
Stemming the tide of experienced advisers leaving the industry would also leave more mentors available for young advisers to learn from, create more avenues for consumers to access advice and likely reduce the cost to provide it.
A detriment to advice
The price of carving out the degree requirement could be steep, however.
“Winding back the education standards now would be a detriment to the advice industry becoming a profession,” says Deborah Kent, a 34-year adviser at Integra Financial Advice, former president of the AFA and director of FASEA. “It would also reduce the consumer trust in advice that the legislation was aimed at fixing.”
The education requirement was introduced by ex-financial services minister Kelly O’Dwyer after Financial Services Inquiry and Parliamentary Joint Committee reports said standards didn’t fit consumer needs or expectations.
Creating a loophole for experienced advisers to dodge the degree requirement now would create a two-tier system, Kent argues, which would leave consumers unable to discern whether they’re licensed adviser is degree qualified or exempt.
It would also undermine the work done by advisers who have attained an equivalent degree, she says, who could no longer say they’re part of a legitimately qualified profession.
“Suggesting that someone who has 10 years’ experience and is RG146 qualified should have the same status as advisers who have met their education requirements should not be tolerated by the advice community,” Kent says.
According to 30-year JBS Financial adviser Jenny Brown, suggestions that opposition to the proposal is coming from “elitist” young advisers is off the mark. Most experienced advisers want to retain the higher standards, she says.
“I take offence when I see headlines calling those of us who what to improve ourselves and our profession as ‘elitist’,” Brown says. “I know many advisers who are older than me who have also passed both the exam and completed their additional study and while none of us really wanted to do this, we needed to ensure we keep up with what clients and consumers at large believe a professional adviser to be.”
According to Perth adviser Craig Prosser, the ALP’s proposal is a “big backwards step”.
“We want to call ourselves professional,” Prosser said on Professional Planner‘s comment hub. “What other professional doesn’t need a degree?”
As part of his announcement last week, the ALP’s Jones said: “We’re going to assume that ten years plus experience is worth at least a degree.”
According to Prosser, that’s not a safe assumtion.
“Who is going to assess whether their experience is good experience or bad? There is still a lot of poor advice out there… and some has come from experienced advisers.”
Delicate policy lines
The ALP’s proposal poses a somewhat awkward issue for the major advice associations which, despite needing to support increased professionalism, also need to show support for policy that would make life ostensibly easier for some advisers.
It’s a fine line the Financial Planning Association are walking by rejecting the equivalent degree exemption idea, but welcoming discussion around better and wider recognition for prior learning.
“The FPA believes there is scope to develop a more comprehensive framework for recognising prior experience, however educational standards for planners are a core element of ongoing professionalism and we shouldn’t backtrack on these,” says FPA head of policy and standards Ben Marshan.
There are versions of the FPA’s CFP certification that still haven’t been recognised, Marshan says. “It’s unclear to us why and what their reasoning was.”
The Association of Financial Advisers’ chief executive Helen Morgan-Banda says the group supports an increase in the education standard, but wants better “transition models” for advisers.
A number of implications
With two weeks to go before FASEA is wound up and Treasury takes on its standard setting responsibilities, outgoing FASEA chief executive Stephen Glenfield reflects on how many advisers have already uplifted their education level.
“Of those with greater than 10-years of experience on ASIC’s register back in 2019, 21 per cent had no bachelor level degree or higher education… but that number is now 11 per cent,” he said. “So a large body of advisers are raising the standard of education.”
While reticent to comment on the merits of Labor’s proposal, Glenfield says a deliberate decision was made by the government not to grandfather advice experience when the legislation was drafted.
Pulling that apart will have a number of implications, he notes.
“You need to consider what those who have taken themselves part-way or all the way down the education journey think about the proposal,” he says, “And is consumer confidence impacted if you have a two-step system?”