The Professional Year obligation for new advisers, which involves 1600 hours of work activities and 100 hours of structured training, is part of broader education measures introduced in recent years designed to eliminate poor advice and improve professionalism. Hundreds of advisers have completed their PY since new education standards were introduced in 2019.
But a lack of structured training programs supporting the development of new recruits has made it challenging for PY advisers and the advice practices that support them.
The case for fresh talent
Regulatory changes in recent years have made it challenging for advisers to service a broader range of clients, particularly those with lower balances.
The number of advised clients at CFS with balances under $150,000 has halved in five years, from around 40 per cent in 2019 to less than 20 per cent today. At the same time, the number of advised clients with balances over $500,000 has more than tripled.
This trend is a concern to all of us who understand the value of advice. It is particularly concerning for those with lower balances; their need for financial advice can be even greater, especially after significant life events such as marriage, starting a family, divorce, illness, or death.
Considering these challenges, the PY obligation is a great way to support the entry of new, quality advisers to the profession, to increase capacity and broaden the client segments currently being served. It’s also a great way for advice firms to encourage employee retention and grow their practices.
The education gap
Restructuring in the industry has led to many advice businesses leaving large institutions to become self-licenced. This means that training and development resources normally available to advisers must be funded and delivered by the practices themselves.
While some licensees offer professional year support in varying degrees, this is limited to their networks and leaves self-licensed firms searching for a solution. When an advice practice is unable to access free education services, it needs to either invest in training or deliver it internally, which in some cases can leave PY advisers with a lack of diverse, quality education options. The investment necessary to train PY advisers is compounded by growing time and cost pressures, leaving PY advisers without the level of support they need at a critical juncture in their career.
CFS launched the Elevate program in partnership with Ensombl, to make it easier for financial advice firms to deliver quality advice and to help licensees and small businesses to retain, attract and develop their staff, including new advisers.
More than 490 professionals have joined the community and are now enjoying a space that allows PY advisers to connect with their peers to share best practice, learnings, and experiences, as well as gain access to more experienced advisers.
Broader problems to solve
The PY obligation is just one aspect of a broader set of challenges that need to be addressed.
Financial adviser numbers have declined from around 25,000 to under 16,000 in the past three years, with the cost of advice now around $4500. This puts financial advice out of reach for many Australians.
Supporting the entry of new advisers to the industry is one of many ways to address this growing problem.
We’re supportive of the broader recommendations made through the Quality of Advice Review conducted by Michelle Levy and note the government’s decision to proceed with a number of these recommendations.
We look forward to seeing these recommendations implemented, while continuing to support new and existing advisers to help Australians achieve financial freedom in retirement.
Bryce Quirk is group executive for distribution at Colonial First State.