The proposed Financial Adviser Standards and Ethics Authority exam will not build trust in the financial planning profession until Chapter 7 of the Corporations Act is rewritten to separate financial planners from product licensing laws, according to former Financial Planning Association (FPA) board member, Julie Matheson.
In a submission filed with FASEA responding to its consultation paper on the Financial Adviser Examination, Matheson has pointed to the fact that the Corporations Act currently places licensees in charge of education standards irrespective of the licensees’ own qualifications and knowledges.
She used as an example the FPA’s own journey with respect to its Certified Financial Planner (CFP) designation and the fact that in 2004, the FPA reached a milestone with 5,413 registered CFPs before, in 2011, changing the education standards for new members to an approved university degree.
“CFP members had grown by just 240 to 5,653. Fast forward to 2017, the FPA now has a membership base of 12,896 and CFP members are just 5,629, a decrease of 24 since the degree was introduced in 2011,” Matheson’s submission said.
She said the major obstacle in the adoption of the FPA’s CFP designation and higher education standards had been Chapter 7 of the Corps Act 2001 stating: “This chapter has ensured that financial planners are not educated to an independent standard like the CFP, and compels financial planners by law to abide by the directions of a licensee which manufactures and distributes product under ASIC’s supervision to ensure market integrity”.
“Part 7.6 Division 3, 912A General obligations places the licensee in charge of education standards to ‘take reasonable steps to ensure its representatives comply with financial services laws’; and to ‘ensure that its representatives (financial planners) are adequately trained, and are competent to provide those financial services’.”
“As the Royal Commission into Banking has shown, a licensee with a law degree or an MBA in charge of financial planners, degree or no degree, has complete control over the profession and its legitimacy,” Matheson’s submission said adding that just 8,704 out of 25,386 financial planners had a degree at bachelor level or above, despite the FPA’s education push since 2011.
“This proposed exam will not legitimise or build trust in the profession of financial planning until Chapter 7 of the Corps Act 2001 is rewritten to separate financial planners from product licensing laws,” she said. “A financial planner with a degree or pass mark for an exam has no powers under the Corps Act 2001.”
