Over 60 per cent of advisers think candidates who have failed the FASEA exam twice should not be allowed to provide advice in 2022, according to research from AR Data.
The firm’s ‘Musical Chairs’ report for Q4 noted that legislators recognised “the market is in freefall” leading to the introduction of measures to dissuade people from leaving the profession.
While the report states “almost two thirds” of advisers oppose the reprieve, no specific data or methodology relating to the figure is provided.
“Towards the end of last year, advisers who had twice failed the advice exam were given a nine-month extension to October 2022,” the report explains.
ASIC took over management of the exam at the start of the year, after it was announced in late 2020 FASEA will be scrapped.
Hume announced the September extension last July, which allowed advisers who failed the FASEA exam twice before 1 January, 2022, to have until 1 October to pass the exam.
However, the minister told Professional Planner at the time the extension was announced the move wasn’t about adviser retention.
“It’s about allowing those who have made a concerted effort to take the exam but whose preparation may have been interrupted by ongoing Covid-19 disruptions to have a clearer run at the exam in 2022,” Hume said.
The report noted the number of advisers at the end of the year was 17,351, with that number declining further to 17,282 at the start of February.
Majority support experience
In contrast to the purported lack of support for advisers who didn’t pass the exam, the same survey expressed a slim majority of support for better recognition of experience.
“At the very end of last year, Treasury asked for feedback on whether the standards do enough to recognise on-the-job training or if experienced advisers should be able to circumvent the degree requirement, provided they complete an ethics course,” the report said.
“A slight majority of Adviser Ratings readers (56 per cent) thinks experience should be incorporated into any revised standards.”
The experience pathway polarised advisers, with the Financial Planning Association being open about the fact it shifted its view on the issue after receiving feedback from members, who were largely against the proposal.
The Association of Financial Advisers found 53.6 per cent of its members supported the government’s pathway proposal, which led to it recommending alternate pathways for those with 10, 15 and 20 years experience.
Some submissions from advisers criticised the move as it would question the legitimacy professionalism will have, which Hume and her opposition counterpart both disputed.
I know I have spoken about this before and maybe a different way of explaining the differences between holistic Advice and specialist risk advice might highlight why there MUST be changes to the current system.
Let us assume we have 20,000 Holistic Advisers and 20,000 specialist risk advisers.
What we have is a great combination of skills that will allow more Australians to get their asset and income protection needs in place in a cost and premium effective way without the massive premium increases and dilution of product features which is what is happening today.
Billions of Insurance New Business premiums will be written, the under-Insurance epidemic will start to diminish and the Life Insurers will be able to pull out of their spiraling fall in true new business, instead of the current situation where replacement of existing premiums due to clients who are angry at their double digit premium increases and threats to cancel unless something is done, is the focus.
If holistic adviser numbers drop to 10,000 they will still make money and their profits will rise as they can be selective of which client demographic they want to work with, which are high net worth people who can afford to pay.
The Financial Planning Industry will become elitist and the vast majority of Australians will miss out on being able to get quality advice.
The end result. Good for the remaining Planners.
As for the specialist risk Advisers, we do not have 20,000 or even 10,000 Advisers left.
Specialist risk Advisers are numbered at less than a few thousand now and we have seen the effect with 100% plus premium increases, Billion dollar losses and very disgruntled clients who resent being forced to pay ever increasing premiums with no end in sight.
Advisers who have struggled over the last few years trying to survive and still were forced to do extra study, now quite rightly feel upset that other Advisers who did not put in the extra effort to comply with the FASEA farce which EVERYBODY recognises had major flaws, feel ripped off.
However, unlike the holistic Advisers who will thrive with less Advisers in the pool, it is completely different with Risk advice.
When the GFC hit and holistic Advisers increased the amount of Insurance work they provided to offset the downturn from the Investment side of their Businesses, this was great for the Life Insurers.
However, as it became progressively harder to provide risk advice, many holistic advisers became aware that this side of their service offering was becoming too onerous and as the Regulations increased, the numbers of advisers writing Insurance started reducing which has led to an Australia wide disaster that has led to the problems we all face today, which is a diminishing advised New Business pool, growing claims and increased costs borne out of an unworkable Regulatory regime that does not recognise that less Insurance Advisers writing new premiums and retaining existing premiums, means a crippling downward spiral for all Australians.
Insurance is a numbers game where the pool of paying customers, covers the claims and running costs of Insurers which includes the cost of Advice.
Less holistic Advisers, means more revenue for the remaining Advice Practices.
Less risk advisers and scoped out risk advice from holistic Advisers due to the inflexibility and red tape restrictions that inhibit risk advice, means the retail Life Advised Industry continuing it’s decline and premiums soaring every year to offset the losses.
The solution is simple and MUST be done to save Australians from further declines in appropriate cover to meet their needs, which is to separate risk advice from Investment advice and make it feasible for the Life Insurance Industry to recover by having specialist training in risk and take out the irrelevant education requirements that have no bearing on the risk specialists work.