The financial planner’s guide to new education standards

Professional Planner


August 15, 2016

I had a conversation recently with someone applying for a licence with ASIC [the Australian Securities and Investments Commission]. They presented all their education qualifications, including their degree and Certified Financial Planner (CFP) designation, and so on – and they had been practising for 12 years – and the question that ASIC asked was: are you RG146-qualified?

Professional and education standards are a hot topic at the moment for all of us. The framework that’s proposed has, smack-bang in the middle of it, a new independent body. ASIC does not have the will, does not have the expertise and does not have the resources to run the education register like it used to. The list of approved courses has been abandoned now for three or four years. This independent body is going to take that role.

The independent body is going to be the holder and gatekeeper of education going forward. It will develop the curriculum; it will approve the universities or education providers, that have courses that meet the curriculum; and they will audit those courses of those education providers as well. And it will keep a register.

As an employer you will be able to see, if a person tells you they have done a course, that the course is listed and approved by the new independent body. So that’s going to make life easier.

Powerful body

But the independent body is going to do a lot more than just that. It’s going to look at a whole range of things, including the professional year, and what the professional year is going to look like, and an industry-wide standard for the professional year.

It’s also going to look at the registration exam – what the exam is going to be about, and who’s going to have to do it. And effectively, it will also set a continuing professional development (CPD) policy, including the minimum CPD requirement.

You’re all currently obligated to complete ongoing professional development, but ASIC does not tell you what the minimum requirements are. For the first time there will be a minimum CPD standard for the whole industry.

The independent body will also develop the criteria for what a code of ethics should look like. Again, one of the proposed requirements is that everybody will need to become subject to a code of ethics. For FPA members, you are subject to a code of ethics; but it’s not compulsory [that non-members are subject to a code] – it’s voluntary. For the first time, every practitioner will be subject to a code of ethics in the new regime.

But effectively, just to complete the circle, you’ll need to have a degree, complete a professional year; you’ll need to be subject to a code of ethics and pass an exam; you’ll need to do ongoing CPD; you’ll then be listed on the ASIC register; and then, as a result of all that, you will be able to legally use the term “financial planner” or “financial adviser”.

Anybody who doesn’t meet those criteria and uses the term “financial planner” or “financial adviser” is doing something illegal. Those persons can be prosecuted for misrepresenting themselves – as of today there is no power to do that.

How to find an independent ‘independent body’?

As for the independent body itself – who’s going to be on it, what’s the make-up going to be – these are still questions that are open-ended. We’re looking at nine representatives that are going to be put on the board. Originally, the responsible minister was going to appoint only the independent chair; now the minister is going to appoint the whole board. There will be representatives from industry, there will be representatives from education, there will be representatives from consumers, and an ethicist as well.

One of the issues we’ve got is they all have to be independent – they cannot be office-holders. They cannot work for anyone in the industry; they cannot work for an education provider. It makes it a bit difficult to find somebody with expertise who’s not actually in the industry or in the education field. Common sense needs to prevail there, in that respect.

The important thing is that there are four key criteria that a new financial planner will need to meet, in order to be deemed able to practise in the new regime: a degree as approved by the independent body; complete a professional year, as prescribed by the independent body; complete or pass a registration exam; and be subject to an approved code of ethics. If you tick those four things off then you’re able to practice in your own right as a financial planner.

This will remove any opportunity for the media to start fighting those six-day courses and quick-and-cheap ways in which people become financial planners. It is now impossible for somebody to become a financial planner without having to do some pretty stringent work. And in fact I would go so far as to say this is a greater barrier and greater roadblock than becoming an accountant, and it’s up there with the legal fraternity as well, in terms of the components, and in terms of the requirements. So it is very stringent and it’s going to make financial planning as a profession, one of the leaders, in terms of the process of getting in.

That does not come without its negatives, of course. The supply of future financial planners is a big concern, obviously, and we’re aware of that and the FPA is actively engaging wit h students to encourage more students to consider financial planning as a career choice. One of the things we have, that other professions don’t have, is jobs. There are many accountants, lawyers, finance graduates that won’t get jobs in those field.

They can come into financial planning and I think there is a great opportunity there. They just need to be aware that financial planning exists.

What does it mean for existing financial planners?

The big question is what about existing financial planners? What’s the process? Effectively, there are four key criteria as well that need to be met. There is ongoing CPD, so that should be not a hurdle for FPA members. Being subject to a code of ethics – again, if you’re an FPA member that shouldn’t affect you. The exam is one that may affect you, and the FPA is in discussion with government about allowing the independent body to consider alternative exams to “the” exam. In other words, if you’ve completed an assessment that is equal to or greater than the one proposed, then we would argue: why would you require someone to do it twice?

But the big one is the recognised prior learning (RPL) framework. Everybody in the room has a different level of qualification, different levels of experience, and different backgrounds and pathways.

The legislation itself does say you will need a degree or equivalent. The minister prior to the election came out with a statement to the effect that you will no be required – that is, existing advisers – will not be required to complete a bachelor’s degree. But if your highest level of qualification is, for example, the advanced diploma, you will have to do some further study, some type of bridging course, that will be developed to take your qualification up to AQF7 level or above; a graduate diploma, perhaps.

We will be negotiating with the independent body to have the CFP course recognised as degree or equivalent. That won’t be done automatically; everybody who wants to have their course approved will have to submit it. We’re very confident because the CFP course is already recognised at AQF9 for the purposes of exemptions for masters programs.
If you’ve got a bachelor’s degree, the government is also keen to broaden relevancy. Of if you have a degree in economics, finance, [or] accounting, they are prepared to allow that to be deemed as relevant, and the independent body will provide more clarity about that. For existing planners, your existing qualifications are going to be recognised as much
as possible, to allow you to come through without having to do additional study.

But what I will say, is that anyone who has as their highest qualification an advanced diploma or diploma, there will be further study needed. And the FPA is looking at some solutions for you that we’ll come back with by the end of this year.

The clock is ticking – but now in a more staggered fashion

The final point is, when do you need to do all this by? Some of you may remember that before Christmas the timeframes were that the whole transition had to be done by 2019. We just felt that was not practical – not practical at all. Considering at the time, as well, it was a bit ambiguous as to whether or not a bachelor’s degree would be needed for existing financial planners, options outside a bachelor’s degree or a master’s were pretty scarce from the education providers; now they have the opportunity to create bridging programs to assist people who could have a gap.

So the timeframes are this:

From 2019: New financial planners – people who have not been on the ASIC adviser register before January 1, 2019 – will have to meet four requirements: an approved degree, a professional year, pass an exam and be subject to a code of ethics.

From 2020: Everybody will need to be subject to a code of ethics. So even though from an education perspective you will not need to have completed anything by then, everybody who is a practitioner will have to be subject to an approved code of ethics.

By 2021: If you need to complete the exam, you will need to have completed it by January 1, 2021. An exam will have to be developed and you’ll have to pass. If you do not pass by January 2021, you will not be able to practice from that point.

By 2024: If you do need to do further study, you’ll need to have that completed by January 1, 2024.

It’s a lot more staggered now. It’s a lot more practical and workable. You can look at these particular stages in isolation, as well as over that period, if you need to do some further study, you can give yourself a decent amount of time to complete it.

There has been some criticism that the 2024 timeline is too long. What those critics didn’t understand is that the 2024 deadline is just for the study component. The new regime starts before then; it’s just that it’s spread out. People look at 2024 and think you do not have to do anything until then. That’s incorrect.

We worked very hard lobbying government about timeframes not being appropriate – 2019 was way too short, and in fact was not even achievable, in terms of having all the details worked out. There was no way an exam was going to be up and running and people could sit it before 2019.

This is a reasonable outcome. Just to be clear, legislation has not yet been introduced. There was draft legislation; it didn’t get introduced to the parliament; but now that we have a government back in, we will then find out the timetable. The government has indicated this is a priority. It’s not contentious, and there’s bipartisan support in terms of lifting education standards. We are hopeful this education legislation will be completed and passed by the end of this year, which then means the independent body can be established by June 2017.

Dante De Gori is the chief executive officer of the Financial Planning Association (FPA).

This is an edited transcript of comments made by Dante De Gori at the Financial Planning Association 2016 National Roadshow in Melbourne on July 13.

TOPICS:   CPD,  Dante De Gori,  education standards,  Financial Planning Association (FPA)

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