The government will go ahead with the 10-year requirement for the experience pathway with draft legislation released on Tuesday for consultation.
The bill entitled Treasury Laws Amendment (Measures 4 for Future Bills) Bill 2023: Recognising 5 experience in the financial advice will still require advisers to pass the adviser exam, as well as having a clean record.
The 10 years cumulative experience boundary will between the start of 2007 and the end of 2021. Strangely, the disciplinary record requirement cut off ends on 31 December 2021.
Officially, a “clean record” will be defined as not being banned or disqualified nor given an undertaking under the ASIC Act.
Anyone eligible for the education carve out must make a self-declaration confirming they have met all the criteria to be an experienced provider, which can be done to their licensee if they are an authorised representative.
The law would require a notice to be lodged to ASIC within 30 business days after 1 January 2026 or within 30 business days of the adviser becoming a relevant provider.
AFSLs will be held accountable for authorising relevant providers under the experience pathway, and the individual adviser and licensee will be hit with criminal and/or civil penalties for giving false or misleading information.
Financial advisers who are also registered tax agents will also no longer be required to meet the additional education requirements to be a qualified tax relevant provider.
Relief for grads in limbo
To help potential advisers whose degrees may not be approved for technical or clerical reasons, the draft legislation allows new entrants to apply to the Minister to have their degree recognised.
“This provides greater flexibility to new entrants, recognising that there may be different study pathways available to satisfy the education and training standard,” the explanatory memorandum for the draft legislation said.
The draft bill recognises there are circumstances where a person has completed a domestic qualification equivalent to an approved degree but are currently prevented from entering the profession.
Long journey
At the end of 2021 while shadow minister, Jones proposed the experience pathway to prevent further advisers from departing the industry.
Then Minister of Financial Services, Jane Hume, took the proposal to consultation before the election, generating polarising feedback from a majority of advisers who expressed discontent that it was taking a step back from professionalising financial advice.
After Labor secured Government with the Federal Election win in May, Treasury launched another consultation last August.
Alternatives to soften the impact of the pathway were proposed, such as a sunset clause which was backed by the Financial Advisers Association and The Advisers Association. Additionally, the TAA suggested extending the experience threshold to 15 years.
Referring to a media release sent out by the TAA on Tuesday morning about “guardrails” needing to be in place for the Quality of Advice Review’s ‘good advice’ regime to work, Macdonald insinuated the same approach must be taken towards the experience pathway.
In the release, Macdonald said the guardrails around the QAR should set firm boundaries for who can give advice and to what extent, including the minimum education and qualifications needed to do so.
“We believe that professional financial advisers should be both experienced and qualified, which aligns with consumer expectations,” Macdonald tells Professional Planner. “So, guardrails should be put in place around experienced advisers who are not qualified.”
He adds the association previously suggested making this clear in the adviser FSG, as well as having a 10-year sunset clause from January 2026.
“Combined this would mean informed consumers with access to advisers and the sunset clause would stop potentially 35-year-olds being grandfathered for life without any formal qualifications,” Macdonald says.
“If there was a sunset clause, we are less concerned about whether the experience is 10 or 15 years, and would not push for 15 years even though that was our preference.”
While FAAA head of policy Phil Anderson welcomed the certainty the pathway will provide older advisers, he says the association still recommends a sunset clause.
“As previously advocated, we recommend that the Government include a requirement for experienced advisers to complete the ethics unit and to provide for a 10-year sunset clause,” Anderson says.
He also welcomed the fixing of discrepancies for new entrants and the education requirements for tax agents.
In a media statement, FAAA chief executive Sarah Abood said while relevant experience should be valued, education is an important part of the professional standard.
“We believe that relevant experience is an important element to maintaining the required standard for professional, quality financial advice that will provide the best outcome for Australians,” Abood said.
“That said, we continue to feel strongly that there should be a time limit on the pathway such that a relatively young adviser does not continue to practice indefinitely without relevant qualifications.”
Consultation will close on 3 May.
