One of the requirements created by the Financial Adviser Standards and Ethics Authority’s (FASEA), the Professional Year, has turned out to be ‘completely unworkable’ and become one of the main roadblocks for young financial advisers attempting to get their foot into the industry, according to Wealth Today’s managing director Keith Cullen.
Speaking to Money Management Cullen said that the new requirement, which mandated all new industry entrants from 1 January , 2019 to undertake the Professional Year before they are qualified as a financial adviser, was created in an environment where there were still high numbers of advisers operating under institutional ownership which could provide corporate support to people in their professional years.
However, with a rapid change in business models’ and a growing number of one to seven employee firms which operate under larger licenses but as individual businesses, this requirement has become more of an obstacle for many young graduates.
“What is happening is that the disintegration of those institutional-owned advice models has pushed the industry back into where it was 10 years ago which is really what I would call politely the Australia’s biggest college industry,” he said.
“I think it’s like a massive blind spot for the industry too and we are not maybe seeing it today but we are certainly going to see it from a succession planning perspective.”
According to Cullen, the industry as a whole should pay a closer attention to where the ‘new blood’ was coming from in order to avoid further problems around the business succession planning.
“I think we’ve put up a brick wall for all these kids who are doing relevant degrees in the industry , in terms of their ability to enter the industry and what we have left them with is a $25,000 HECS bill and no way of getting a start in the in the industry,” he added.
The FASEA’s Professional Year standard, which commenced on 1 January, 2019, is a requirement of the Corporations Act 2001 that all new industry entrants are required to undertake before they are qualified as a financial ddviser to provide personal financial advice to retail clients in respect of retail financial products.
Under the Professional Year’s requirement, every new entrant is required to undertake a Professional Year of one year full-time equivalent comprising 1,600 hours, of which at least 100 hours is to be structured training.