Clockwise from top left: Sarah Abood, Peter Burgess, Judith Fox and Zach Castles

Industry associations have welcomed proposed changes to the adviser exam but have used the consultation process to critique the cost of the exam to candidates.

The government launched a consultation at the end of 2023 to change the exam to consist of only multiple choice questions, as well as removing restrictions over who could sit the exam.

After the final deadline for practicing advisers to complete the exam passed in September 2022, only Professional Year advisers in their third quarter have been permitted to sit the exam.

When FASEA was wound up at the end of 2022, ASIC took over administration of the exam and the cost to sit the exam rose from from $597 to $973. Last year, the price was further bumped to $1500.

In its submission to the consultation, the Financial Advice Association said the old exam fee, while not only lower, was also a deductible business expense to most candidates from 2019 to 2022, when practicing adviser candidates were sitting the exam.

“It is assumed that the majority of people sitting the exam now are new entrants who are doing their professional year, and many will not have the ability to claim the cost as a tax deduction as they are not yet practising,” the FAAA submission said, signed by CEO Sarah Abood.

“There are two major problems that have broader consequences. Firstly, the exam is far too expensive for university students and career changers. This is a factor as a disincentive for some to pursue a career in financial advice.”

The SMSF Association has made similar calls, arguing the increases are significant, unsustainable and risk creating a barrier to entry to the industry.

“We anticipate, and look forward to, the proposed exposure draft amendments resulting in a substantial reduction in the exam fee,” the SMSF Association submission said, signed by CEO Peter Burgess.

The Stockbrokers and Investment Adviser Association submission said that PY candidates have already incurred significant costs to undertake mandated education to enter the profession and further “significant costs to sit the exam cannot be justified”.

“Once the proposed changes are implemented, the cost to the exam provider should reduce significantly and this should be passed on to the exam candidates in the form of a lower exam fee,” the SIAA submission said, signed by CEO Judith Fox.

Strong backing

While the cost of the exam became a key target of the submissions, the FAAA, Financial Services Council, SMSF Association and SIAA all placed their support behind both changes proposed by the government.

“Without a need for subjective assessment of answers, the marking process can be largely automated removing the risk of human error and subjectivity,” the FAAA submission said.

The FSC submission said any argument that multiple choice questions are easier for students to game are unfounded.

“Multiple-choice exam can be appropriately set and rigorous,” the FSC submission said, signed by advice and platforms policy director Zach Castles.

“Given the proposal requires at least 70 questions we view this as adequate to test such knowledge rigorously without diminishing education standards.”

The FAAA also noted that new entrants also need to have completed a university degree.

“The financial adviser exam is not the only exam they need to pass to commence a career as a financial adviser,” its submission said.

Open for all

The FSC had previously suggested opening the exam to all licensee staff and said in its submission the proposed change would give PY advisers more flexibility to sit the exam, especially given they are required to have passed the exam before the third quarter of their PY year.

“Typically, PY candidates will sit the exam while they are going through Quarter 2,” The FSC submission said.

“Given there are four exam sittings in a calendar year this could potentially cause some delays, especially if a candidate fails an exam and has to re-sit.”

The FAAA said employers would gain more certainty if they were able to appoint new entrants that already completed the exam, along with the benefits for students.

“Recently, exams have been infrequent and the timing has not always lined up neatly with the end of the academic year,” the FAAA submission said.

“As a result, students who had completed their studies, have sometimes had to wait many months for the opportunity to take the exam – a problem that is further exacerbated if a student fails.”

The SIAA supported the proposals but also made other suggestions, including changes to the scope of questions, giving unsuccessful candidates personalised feedback, and removing “trick” questions.

The exam should provide a broader range of scenarios than simply those based on financial planning so that the exam reflects the full spectrum of financial advice,” the SIAA submission said.

“Questions that have two correct answers requiring the candidate to guess the ‘most correct’ answer should be removed and replaced with questions that test the candidates in ways that ensure they know the material rather than trying to trick them.”

One comment on “Exam changes welcomed, but cost should be cut: Associations”
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    Jeremy Wright

    The key element to solving a problem, is to first understand what the problem is.

    The next key element is to find the most effective way to fix the problem in a manner that does not cause mayhem on the road to salvation.

    What has occurred over the last 6 plus years, has been a Faulty Towers rendition of fixing the building with the well-meaning Irish Builder that thinks he understands the problem and half listens to Basil who has his own interpretation of what needs to be done and ignores sage advice and direction from his wife who actually works in the Business and knows it inside out, then he and the builder do the exact opposite of what needs to be done and chaos ensues.

    EVERYTHING in life has to have a strong foundation in order for it to first survive, then build upon.

    The Financial Planning Industry and ALL Australians need as their foundations, Wealth Protection as their first priority, upon which they can build their wealth.

    For the vast majority of people and Businesses, wealth disappears if the ability to work and earn money is halted by illness, disability or death, which is where the Insurance comes in, to place a supporting foundation to protect what has been built.

    Without lump sum cash and income injections, what has been built, is nothing more than a house of cards waiting for a wind to blow it all down.

    Every Financial Planner knows this and Australians DO NOT know this, or they put it into the TOO HARD basket, which only sees the light again when the Financial Adviser refers the client to a risk specialist to build a strong levy bank and protect the client.

    Thousands of holistic Planners used to provide risk advice, or refer it to the thousands of risk specialists.

    Then the Vested Interest groups and Government led “improvements” came into being which made the provision of risk advice a nightmare, thousands of risk specialist warned that unless there was changes to the unworkable maze, they would leave the Industry, they were ignored and NOW we have hundreds of risk specialists, the holistic Planners cannot work the risk maze and can only react to the massive premium increases due to plummeting New Business sales, when their client threatens to cancel their covers unless something is done, which also threatens the Advisers Investment work.

    This has been clearly articulated for nearly 10 years from experienced Advisers who looked into their crystal balls and saw the future, wrote to the Government, Regulators, Treasury, Associations and anyone who would listen.

    Alas, we were ignored and the vested interest Education guru’s salivated at the Billions of dollars of fees they could charge those 28,000 Advisers.

    When the 28,000 Advisers plummeted to less than 16,000 there was an outcry from these Institutions who did what the Insurers do when their revenue is impacted, they raise the fees on the remaining people.

    NOW, back to solving the problem.

    Blind Freddy can see that when you go from thousands to hundreds of Advisers, that is a problem, not a solution.

    So where did we land to fix the problem?

    We make it much harder, much more expensive and to really throw the cat amongst the pigeons, we make existing risk Advisers do expensive and time consuming studies in fields that have ZERO to do with the work they will perform.

    For new risk Advisers, they are given an even more complex maze, by making them pay a Kings ransom to complete a University degree, of which most of it has ZERO to do with the work they will Advise on.

    They will go into massive debt, have years of nil income and once they complete their term of financial incarceration, they will be forced into another year of low income, more exams, of which nearly all of it, you guessed right, has ZERO to do with what they will be providing advise on.

    And we wonder why virtually zero new risk specialists have entered the Wealth Protection Industry?

    The Life Insurance Industry has collapsed and to prevent foreclosure, have doubled existing loyal clients premiums, which is a short term band aid, not a solution.

    I have been stating for 10 years that Wealth Protection / Life Insurance Advice, MUST be separated from Investment Advice and upfront and ongoing education, must be fit for purpose.

    You do not need a University degree to let people know that they are desperately in need of appropriate Insurance.

    What is needed is a pathway that encourages new people to enter the Industry, not the current maze which does everything in it’s power to stop people entering, of which, for that effort, wins the gold medal of doom.

    I entered the Industry 37 years ago with no University degree.

    What I brought to the table was a willingness to learn the ropes, work hard and do continuous ongoing studies while I built my risk Business, which today, still has a 100% success rate with client claims, nil client complaints and a huge depth of knowledge built from experience that counts for little in our drive for paper shuffling, theory based qualifications.

    Today, I would not even be given a chance to start.

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