The Financial Adviser Standards and Ethics Authority (FASEA) has defended the fairness of the eponymous exam and says the high pass rate shows it is an achievable exam for “competent” advisers.
At the conclusion of the May 2021 exam, 16,700 advisers had sat the exam with 14,850 advisers passing, which FASEA said represented 70% of the Australian Securities and Investments Commission (ASIC) Financial Adviser Register (FAR).
So far, 89% of exam takers had passed and FASEA said the pass mark of the exam was aligned to a typical university credit range.
“The credit-level standard required to pass the exam reflects the minimum level of competency required for professional practice and that all questions are set at a difficulty level that a competent adviser should know,” FASEA said.
“The high pass rate reflects that the exam is an achievable exam for competent relevant providers regardless of their area of specialisation.”
Phil Anderson, Association of Financial Advisers (AFA) general manager policy and professionalism, said it was interesting FASEA referred to all questions being set at a difficulty level that a competent adviser should know.
“Does this suggest that they think all advisers should get all questions right?” Anderson said.
“This is of course nice in theory. In practice, we have a number of good advisers who are struggling with the exam, and some of that comes down to the pressure and anxiety that is generated by an exam with such extreme consequences.
“It might also be related to difficulties that they are having with their exam technique or using the technology.”
Anderson had recently wrote for Money Management about advisers that suffered from undue stress and a negative mindset, in part due to the pressure of the exam process.
Trouble with pass rates
FASEA said the 89% pass rate was a boost for consumer confidence and a milestone for the industry.
“These advisers have demonstrated they have the knowledge and competencies to understand and meet their requirements when providing personal advice to retail customers,” FASEA said.
Data from FASEA showed that experienced advisers with a bachelor’s degree or higher have a pass rate of 92% compared to an 80% pass rate for advisers without formal education.
“This outcome is consistent with parliament’s view that all relevant providers should hold a bachelor’s degree or higher qualification and supports the vision of the impact of lifting education standards,” FASEA said.
Its data also showed that specialisations could not be argued as a factor for pass rates.
“Stockbrokers have been particularly vocal that the exam is not fit for purpose, FASEA analysis indicated that the pass rate for relevant providers who work for stockbroking Australian financial service licensees (AFSL’s) is 84% and that 14 of the 20 stockbroking on the FAR have pass rates above 84%,” FASEA said.
Despite FASEA’s praise of stockbroker pass rates, Colin Williams, Wealth Data director, said his data showed there was cause to be worried.
“I believe the reference to 84% are the pass rates for the advisers who have attempted it,” Williams said.
“I think the problem with the stockbrokers is that quite a few are not going to be bothered to take the exam.”
Williams previously said he believed 71% of current advisers had passed the exam, as FASEA’s numbers included advisers who were new to the industry and yet to be added to the FAR.
His data also showed that 70% of advisers that were classed as ‘investment advisers’, which included stockbrokers, had completed the exam versus 78% of the holistic financial planning peer group.