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?”
I am over 60 with BA Accounting and passed the FASEA exam and ethics unit. With 35 plus years in the industry and been advising during 87 crash ,interest rates of 17%,1994 correction, Asia crisis ,Dot com bust, GFC and soon next crisis. In all respect to Ms Kent and others in her age group have never seen inflation, rising interest rates ,possible property crisis, recession ,all things that will potentially play out in the next 5 years when the world has 25 trillion dollars of debt. Unfortunately the current education system has not prepared people to adverse times and change in economic conditions.
Ms Kent and her age group have never seen hard economic times for a sustained period and been part of tick box compliance.
Before Ms Kent makes comments ,a professional would have gathered the facts of what advisers could be eligible and what qualifications do they hold. If the greater percentage hold a relevant degree and passed the FASEA exam I do not see the problem as I have done a recent degree course and found it a waste of time to when I did my degree in 1980.Who gets 5 marks for Harvard referencing and knowing how to copy and paste. Because of the marking system I had already passed the unit before doing the final exam.
A profession does need educational standards and persons acting in the best interests of there clients ,not academics and polatitions
Glenfield’s assertion that “….a decision was made by the government not to grandfather advice experience when the legislation was drafted” is not completely accurate. FASEA was tasked with giving credit for CPD against the education requirements and he was taken to task by Sen Amanda Stoker for noting complying with this direction. Had he done his job properly, this entire debate would be moot!
I agree with Gerry Lenihan and Jeremy Wright. I have been providing advice since 1993. My initial degree is in Communications with a sub-major in Economics and this does not meet the approved degree list. However, I have used the subjects studies such as psychology, communications theory, economics to advise clients for the past 28 years. Further, I completed the Securities Institute Diploma in Financial Markets and credits to enable me to provide Financial Planning advice. I now find myself enrolled to complete a course that probably won’t make me a better adviser but ticks boxes for those monitoring the profession. Bear in mind that many advisers could not have completed a course that would be approved now unless it was a degree in accounting. There is no real consideration of the fact that many of us have a degree qualification that provides us with tools that have enabled us to provide effective advice for decades. We have done all the ongoing training that has been required during that time. Lastly, we have satisfied clients and licensees that can attest to our expertise and compliance. Bear in mind that new graduates will need to learn from others with experience and many of those are exiting. The lack of continuity of advice and experience is likely to result in less effective ‘real world’ advice and fewer advisers to provide the services necessary. The various industry bodies and authorities need to consider what outcome they desire and whether the cost is appropriate.
I think there is a middle ground. A RG146 qualification is not enough even if held in conjunction with 10+ years experience whereas a Grad Dip seems too much for experienced advisers.
It seems to me that the transitioned advisers should have been allowed to get there via a maximum of the 3 bridging courses + the exam. This would only be needed if there wasn’t a qualification more than the RG146 behind them. All others have to complete the Ethics Bridger and the exam so the workload is not that much more.
The Bridging courses apply across all industry sectors so the content shouldn’t be foreign to experienced advisers.
The conceptual framework of everyone needing a general (degree) and then they can specialise is the future state – those that enter the industry from 1 Jan 2019. Experienced advisers have already specialised so making them go back to the general adviser state for the sake of qualification is not logical. It’s retrofitting when the industry is established.
Having said that, the exam should however be a general adviser competency test and therefore, specific technical based questions (insurance, superannuation etc) shouldn’t be included.
The future state is soundly based but the transitioning needs some clear headed thinking applied.
Good old Stephen Glenfield, once again no idea. You might find Stephen that the reason those without a degree have fallen percentage wise since 2019 is because older experienced advisers without a degree have left the industry.
There has never been an industry where experienced practitioners, (some with over 30 years experience) and never a complaint have been asked to go back to studying what they have been doing for 30 years. If there is, please tell me.
I fully support educational standards being lifted as a progressive step towards a profession. However to take an axe to those who have been the backbone of acting professionally in their advice practice whilst many around them (FPA included) were acting far from professionally was always an insult and knee jerk reaction set by weak Governments and ineffectual associations like the FPA.
A number of changes, both educational and compliance have been a pure reaction to the Royal Commission. Implemented by weak Government who now trade focus group feedback as a substitute for good policy.
Personally I think any adviser over the age of 50, who had been practicing for a minimum of 15 years with a clean compliance record should have been exempt from day one. That would have retained compliant, highly experienced advisers who grew up in an era where less than 20% of school leavers went on to obtain a degree. Such advisers would have invaluable at mentoring young advisers entering the industry.
And guess what! Those age 50+ would soon be retiring soon anyway,
Instead they have been pushed out the door and a larger and larger section of the Australian population are unable to get advice as the cost is prohibitive. What a great result!
While I can understand all the views and differing opinions, there is a difference between idealism and realism.
As much as the Industry is reaching for an ideal perception of professionalism, surely all protagonists must agree, that the idea of professionalism that appears to only be attainable via a degree, based on the argument being put forward, is a slap in the face of all advisers who spent the thousands of hours of ongoing training, prior qualifications attained and practical experience that has been learned at the coal face, to which the Government and the elitist education lobbyists deemed, amounted to little.
Even the Legal profession has stated that what Financial Planners have to learn and abide by, is a maze of complexity that is way over the top.
If a health specialist tells you that one way to cure head aches is to bang your head against a wall every hour for eight hours a day, is it not appropriate to question first the logic and next, the end result?
Ask Australians what it is that they want and the vast majority will want experience over a bit of paper any day.
This argument being put forward is one dimensional and the people who have made their case, are looking at it in a small way that does not ask the three most important questions and three words that cuts through inane arguments and cuts to the chase.
These three words are WHAT, WHY, HOW.
What is your thesis based on? Why is your argument valid and how did you come to your conclusions?
What we do have is an unworkable position brought on by an ideal that did not ever truly ask WHY is your viewpoint the only one that should be seriously considered and HOW did you come up with your arguments, without taking into considerations of what clients wanted, who from day one, were never consulted, apart from being told what was good for them.
I have 34 years experience, have worked with clients who had small sole trader Businesses, right up to Billion dollar turnover Business clients and not one of them asked me for my degree qualifications, though every one of them asked about my experience and what that experience could do to help them.
Today, we live in a world where theory based qualifications and legal hand holding before any decision can be made, has turned a once great country of doers, into a nanny state where the lunatics are running the Asylum.
In any Business, there is a period of learning and growth and it does not matter how big the enterprise is, there will always be areas that need improvement.
What the bleeding hearts of theory based learning want, is to stop the ship and wait for an ideal tide, weather forecast, planetary alignment and cohesive agreement amongst all crew and passengers as to when to recommence the journey and in a manner that allows no ripple to break the harmonious serenity.
The world never has and never will work that way, yet in Australia, that is the direction the Advice Industry is being pushed.
This highlights the disgusting state of Australian politics and Labor in particular. It was Labor that forced a Royal Commission into things that were already known. That’s not to let the Coalition off the hook. They limited its scope to “wrongdoing” and appointed a fool to run it. He appointed two self-serving smart-arses paid $8,000 or $10,000 a day. And then they accepted every recommendation without any thought. Now after huge personal and financial cost, we are years into this process and Labor wants to reverse it. The major parties do nothing except play a game of “likes”. Never one to dismiss the hard work of many past politicians, I cannot avoid the conclusion that many of the current crop are just rot and detritus.
Interesting move by the ALP. I think that there should be some transition for older advisers, not advisers with 10+ years experience which is not a lot in the scheme of things. Rather I think it should be age based as well. Twenty years experience and over 60 seems a reasonable transition as those advisers will probably all retire within 10 years anyway which is long enough to mentor a new batch of up and coming advisers particularly in soft skills. Older advisers also learn from the younger ones, but use the mature advisers to transfer trust from the current older client bases to the younger advisers, proving to those clients that the younger advisers are just as capable. Yes, over 20 years and over 60.