Wounding a profession, experience pathway passes Parliament

The confirmation of the experience pathway legislation has left the profession with an open wound, but the passage of the bill is also only a band-aid fix and offers nothing to attract the next generation of professionals.

The bill was passed by the Senate with bipartisan support on Wednesday morning. Introduced by Minister for Financial Services Stephen Jones when he was in opposition, pre-election in late 2021, the Coalition government introduced a consultation just days after Jones’ announcement.

The first round of consultation showed the disappointment from the part of the advice community that had remained silent during much of the blowback of the introduction of professional standards.

Debate of the proposed pathway dominated discourse in the advice sector at the start of 2022, with both ministers (then Minister for Financial Services Jane Hume along with Jones in opposition) telling an event hosted by Conexus Financial, the publisher of Professional Planner, that the education carve-out wouldn’t water down professionalism in the industry.

But faced with the reality of more than 10,000 advisers leaving the profession after the Hayne royal commission, the government felt intervention was needed to stem the outflow.

That’s not to say there haven’t been flaws with the transition to a profession. The adviser exam held under FASEA wasn’t a smooth process, and specialisations weren’t handled with care, which has led to decimation of the risk advice industry.

While a sunset clause or other compromises had been suggested by multiple parties, including the Financial Advice Association, the minister declined to make any changes to the final version bill.

The FAAA had tried to mitigate the damage of the profession caused by the carve-out, but when a member survey found 50.9 per cent were in favour of the pathway (with the rest specifically opposed), the association was hampered in its ability to advocate against the pathway without putting half its membership base offside.

However, the level of support for the pathway grew to 70 per cent if both the sunset clause and ethics unit changes were incorporated.

The irony here is that the Financial Planning Association (one of the pre-cursor associations that merged into the FAAA) and the Labor government had been the driving forces behind professionalising the financial advice industry.

“By better recognising the experience of long-serving financial advisers, the government is providing a pathway for experienced advisers to remain in the industry,” Jones said in a speech during the second reading of the bill on 14 June.

“This means that new entrants have the benefit of their experience through mentoring, through supervision and through employment.”

But an unintended consequence of the pathway is tertiary providers will have to reconsider offering advice degrees if there isn’t demand, further impacting education access to future advisers who have no other way to enter the profession.

Additionally, licensees are liable for verifying the accuracy of an adviser’s experience, leaving them at risk of civil or even criminal penalties.

But in the aforementioned speech, Jones said it also means that more Australians will have access to financial advice than would otherwise be the case.

“The government is committed to an advice industry with strong professional standards that give Australians access to high-quality financial advice and to do this by not creating unnecessary barriers to entry, ensuring financial advice remains a career of choice,” Jones said.

The move might be necessary for the government to maintain support in the advice community, which has been less enthused by the slow response to regulatory reform and the expansion of the boundaries of advice super funds will be allowed to give.

But while it is a win for many high-quality, experienced advisers that will have the deserved opportunity to remain in the industry and forego tertiary study, it still leaves a black mark to the eyes of a public that will be left perplexed how a “professional” can be responsible for someone’s financial outcomes despite never learning a formal qualification.