Back to school: Preparing for the incoming education standards

Tahn Sharpe

By

January 30, 2018

When Financial Services Minister Kelly O’Dwyer announced reforms aimed at lifting standards for financial advisers, the statement focused on an existing setup that “allowed some financial advisers to become qualified to provide financial advice to retail consumers after only four days of training”.

The anecdote was accurate. After a couple of relatively simple exams, anyone can call themselves a financial planner. O’Dwyer was bringing to light an uncomfortable truth for both advisers and the public; the advice industry doesn’t have the educational framework it requires to carry a profession, and without a fundamental betterment of the code by which advisers are trained, appointed and monitored, it could never be the profession the public expects and deserves.

The government’s next step was the formation of the Financial Adviser Standards and Ethics Authority, a body that would be responsible for determining exactly what a professional adviser looks like. Board members were selected with backgrounds in academia, ethics and advice.

FASEA’s initial round of proposals raised questions about what would be required of advisers.

Some of these topics brought advisers together – such as how the code of ethics would be policed, and how the exam for existing advisers would be structured. These elements affected all advisers equally. If anything, they bolstered a sense of solidarity, as every existing adviser, from the greenest associate to the most learned principal, was signing up for the same set of guidelines and being forced to study for the same exam.

The education qualification requirement, however, cast a shadow of anxiety across the industry, says David Simon, principal adviser at Integral Wealth. “This is a very rare situation we’re in,” he says. Half of the universities in Australia offer Financial Planning Education Council-approved degrees, which FASEA has OK’d. The FPA expects that proportion to grow.

Shortly after the formation of FASEA, the Financial Planning Association (FPA) released a white paper suggesting a 100-point system that clearly distinguished non-relevant degrees – and even relevant degrees – from the new Holy Grail of qualifications, the approved degree. The proposal relegated advisers that held business and commerce degrees into the same ‘non-approved’ zone as holders of science, engineering and arts degrees.

Some clarity came in mid-December, when FASEA released proposed guidance stating that existing advisers with no degree could complete a pre-approved, one-year, part-time Australian Qualifications Framework Level 8 postgraduate certificate (for which an existing diploma and five years of experience would gain them entry), and a one-year, part-time postgraduate diploma, instead of a six-year, part-time AQF Level 7 bachelor’s degree. To meet FASEA’s requirements, the Level 8 courses would need to offer at least eight units and cover ethics, professional attitudes and behaviours, financial planning, the advice process and technical requirements.

Brian Knight, chief executive at education provider Kaplan, says both years of study in this pathway would involve four units, with each unit equating to roughly 130 hours of study, or about 10 a week each year, total.

It presented a tough slog, but two years part-time was much more palatable than six.

Despite the questions that remain unanswered, one thing is clear – nothing will supplant an approved degree or equivalent in the new world. The silver lining? A sense of solidarity has returned. Everyone is going back to school.

The waiting game

Whilst FASEA needs time to get the reforms right, its chief executive acknowledges that the uncertainty about education requirements could be adversely affecting adviser engagement with other areas, such as the code of ethics.

“What’s apparent to us is that [information on]those particular standards…can’t really be heard properly while the adviser community is deeply anxious about their own education requirements…it blocks them from being able to participate positively, I think, in the rest of the conversation,” FASEA chief executive Deen Sanders told Professional Planner in December.

Despite the industry clamouring for certainty and the timelines looming ahead, Sanders is taking a patient and consultative approach to the degree issue. There is a pattern to the way FASEA is moving forward; proposals are released, ideas are discussed and feedback is sourced before decisions are made. FASEA will be accepting feedback on its website from early 2018, which should further engage advisers. The reforms take shape, step by careful step.

Still, advisers say the lack of a target is unsettling and without knowing how best to get ahead of any requirements, they are handicapped in doing what they’re best at – planning. Stanford Brown chief executive Jonathan Hoyle sums up the frustration: “FASEA absolutely have to get on with it,” he says. “They need to tell us what’s required and let us get on with our new, busier lives.”

Liam Shorte, director at Verante Financial Planning, adds that the lack of certainty has put adviser education on hiatus.

“Most don’t see [the standards] as a problem, but we need clear guidelines on what we are required to cover,” Shorte laments. “I know it has stopped some advisers from committing to other training in 2018, in case they have to commit more time to meeting the new requirements.”

Advisers are reluctant to spend their time on education that won’t meet the requirements, and many in the midst of study say they are in a holding pattern. At Kaplan, Knight has acknowledged this by contacting those studying the advanced diploma of financial planning and offering them an easy transfer to graduate-level studies.

“We’re taking a responsible position on this,” Knight says. “We’re calling students in their first and second subjects and offering to redirect their studies and refund course fees. If they don’t, they may get exemptions, but the important thing is that we’re having discussions with all of them.”

The pathway

FASEA’s proposed guidance for existing advisers provided relief for advisers with no degree, as it proposed a much faster track to meeting the requirement if starting from scratch – two years instead of six.

Given that the certified financial planner designation is master’s-level accreditation, the FPA has expressed the view it should count towards advisers’ education requirements. FPA chief executive Dante De Gori has previously indicated the association would be agitating to have the CFP course recognised as degree or equivalent.  “Everybody who wants their course to be approved by this body will have to submit it, but we’re very confident,” he said. “The CFP course is already recognised academically at an AQF 9 level for the purposes of recognition and exemptions from master’s programs.”

For tertiary-educated advisers, however, there is concern that the proposal seems to lessen the value of existing non-approved degrees and diplomas. That is, if qualified status will be attained by completing AQF Level 8 units, prior learning would serve only to provide entry into the graduate certificate program. Advisers hoping to get credit for their existing degrees and diplomas may end
up being disappointed.

New, busier lives

The level of study necessary to meet the degree requirement will mean a dramatic lifestyle change for a broad section of advisers, some of whom last completed tertiary-level education decades ago.

For older advisers especially, who consider the bulk of their formal education behind them, the prospect of going back to school represents an incredible shift. They face navigating a vastly changed education framework and matching up with younger advisers who are far more conversant with modern educational procedure and technology.

“An older adviser friend of mine hasn’t formally studied for 20 years,” says Integral’s Simon. “For guys like him, it’s going to be a massive lifestyle change. Look at it like this: I’m a runner and I enjoy doing marathons, but if I stopped running and tried again 10 years later, how do you think I’d go? My lungs would be shot, my rhythm would be out and I’d have zero stamina. That’s what it’s going to be like for him.”

The industry could lose many of these advisers, Simon warns, if they decide to forgo mandated education in favour of bringing forward their retirement or going back to former careers. This would represent a loss of the experience that younger advisers need around them.

“At Integral, we’ve got two new advisers who have finished degrees and are starting CFP [certification courses], but have never advised a client,” Simon explains. “They need more than anything the benefit of older, experienced advisers, to show them how to conduct a meeting and interact with clients.”

Older advisers need to be supported, he says, and assured that their contribution is highly valued.

“We have to be careful not to marginalise them,” he says. “And we need to make sure we help them adapt to [institutional] learning again, because some of them will definitely feel alienated.”

Whilst older advisers are weighing up their options, younger ones typically have fewer choices. They are focused on how they will schedule study into their working and family lives. Weekends and evenings will become crucial study windows.

“It’s a tough question for a lot of advisers who are in their late 30s and early 40s,” Stanford Brown’s Hoyle says. “Their job is incredibly demanding and they typically have young families, so their life is already quite full and finding the time to study could be a real struggle.”

Verante’s Shorte identifies the need for licensees to be proactive in supporting advisers during this period, in particular with regards to female advisers.

“I would encourage licensees to be prepared to step up and assist advisers with children, especially young women, who are finally breaking into the industry in greater numbers,” he says.  “If not, we could lose them to other careers.”

Support mechanisms

In order to mitigate both emotional damage to advisers struggling with anxiety and any associated exodus from the industry, appropriate support channels will need to be provided. The role of licensees here, as Shorte suggests, shouldn’t be overlooked. Indeed, if the winds of change continue to blow in the same direction, these kinds of support areas will be where dealer groups will need to start increasing their collective value.

In addition to support from licensees and groups such as the FPA, advisers may need an independent, non-aligned body dedicated to coaching them during their re-education. Any such organisation would need to combine career guidance, educational advice and emotional support.

Laura Carrocci, a life coach and strategist, says advisers need to embrace change actively and see it as an opportunity to grow. “In my experience,” she says, “type A achievers tend to struggle the most with change that is forced upon them.”

Letting go of internal defiance, Carrocci explains, is the key to coping: “Often, a lot of the stress we feel is generated by resistance to change.
We sit and ruminate over why it’s wrong and unfair, but ultimately this creates nothing of value and serves only to exhaust us.”

Kaplan’s Knight points to fear as a hindrance, and explains how the company is preparing for the influx of professionals returning to study after an extended hiatus.

“We’ll make dedicated study groups and educational counsellors available to get them through any initial anxiety,” he says. “But once they’re in it, they’ll realise just how familiar they are with the content, so it’s really a case of us teaching them how to do it from an academic perspective. They all have the fundamentals, it’s just a matter of showing them how to study.”

Doing it right

There can be no doubt that new educational standards will be a positive. Sanders and the FASEA board have proven they are doing the due diligence required to ensure they get it right, whilst groups like the FPA, Association of Financial Advisers and Self-Managed Super Fund Association have all stated they back the journey to professionalism and will continue to provide advocacy and support.

For many advisers, it may be strenuous and uncomfortable but the journey is for the greater good of the industry and the people it serves.

“If consumer expectations are above yours, then you need to rise and meet them,” Shorte says. “It’s going to be painful for advisers, but there’ll be a real sense of achievement once we’re on the other side. In 10 years, we’ll look back on this as a watershed moment.”


TOPICS:   David Simon,  Deen Sanders,  FASEA,  FPA,  Liam Shorte,  Verante Financial Planning

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