The push by the government to change the face of the financial services industry has also included a change in the way planners are licensed and educated. David Chaplin examines where the new height bar will be set.
The recent Government interest in the competency levels of financial advisers is a compliment to the industry and a recognition it has matured according to John Green, joint managing director of Fletcher Green Financial Services.
“It is interesting that only last year the Government laid down competency guidelines for financial advisers,” Green says.
“Before that industry bodies took the running and Government left the issue alone but as the financial advice industry matured it became clear competency guidelines were needed.”
The competency guidelines came in the form of the Australian Securities and Investment Commission (ASIC) Policy Statement 146 (PS146).
PS146 states that financial advisory licensees, life insurance companies and life broker principals must ensure that their authorised representatives providing financial services to retail consumers have the appropriate level of skills and education and are committed to continuing education.
It sounds innocent enough but PS 146 has provoked a great deal of fear and confusion in the industry.
Green, whose firm provides consultancy and educational services to the investment and financial planning industry, says a survey the company recently undertook confirmed this fear existed amongst financial planning principals.
“Many principals couldn’t see how PS146 fitted with the different levels of advisers in their practice. Some of them, especially in the smaller firms, were like stunned mullets,” Green says.
“The second point the survey found was that principals are looking to the FPA for guidance.”
And the Financial Planning Association (FPA) claims it is doing just that.
Ken Bruce, FPA education and certification head, says the organisation has already progressed well in talks with principals.
“We’ve been involved in many of the discussions principals have been having about the implications of PS146,” Bruce says.
He says the FPA will also soon embark on a series of roadshows explaining to dealers – particularly the small to medium size firms – how they can meet their obligations under the new regulations.
“While we will be offering general information the FPA can also offer practical solutions through training audits,” Bruce says.
“A training audit can clarify what advisers are actually doing and match it up against whatever training they may have had. If it is determined further training is needed we can give the right solutions.”
The right solutions may involve assessment of an adviser’s competencies or a recommendation of an education course to fill the ‘gap’ in training.
“ASIC has indicated to us it likes the idea of ‘gap’ training as a solution for people who have a lot of experience in the industry but either they have no qualifications or their qualifications are no longer recognised.”
At the same time the FPA is in the process of reassessing all courses that currently meet its criteria for Diploma of Financial Planning (DFP) exemption.
“The first criteria we will rate them on is if they are on the ASIC register of approved courses under PS146,” Bruce says.
“If they are on the ASIC register we can then evaluate other aspects of the courses against our criteria.”
Financial services training providers are naturally keeping a close eye on the PS146 developments and positioning themselves to take advantage of the opportunities the regulations will throw up.
John Prowse, general manager of financial educational firm, IntegraTec, says PS146 will bring about major changes in the training industry.
“The new regulations have created a demand for assessment tools and gap training,” Prowse says.
“And that is a lot different from delivering courses.”
He says IntegraTec is in the process now of developing a strategy to produce a national network of assessors.
“We’ve formed alliances with a couple of other registered training organisations, including BOSS in Melbourne, to deliver assessment services,” Prowse says.
It is probable that many financial advisers will opt for the assessment process rather than completing formal course work to ensure they comply with the PS146 provisions.
Linda Evans, professional development executive with the National Insurance Brokers Association (NIBA), says there is likely to be a “big hump” of demand for assessors over the next three years.
She says NIBA is well positioned to meet this demand as it has had a strong assessment process in place for several years.
“NIBA produced national standards and a training agenda for insurance brokers many years ago and in 1995 we became a registered training organisation,” Evans says.
“We saw then that most practitioners didn’t want to go back to school to meet the standards and so we developed a range of assessment tools.”
Those tools should prove to be of immense value to the financial planning and life industries as they push to meet the PS146 compliance deadline of June 30 2002.
Evans says many financial planning and life companies have approached NIBA to customise assessment programs for their firms.
“NIBA has expanded its methodology to cover the financial planning and life
markets,” Evans says.
“The new regulations have created an obvious opportunity for us but we didn’t design our program around PS146, it just happens to suit us.”
While many dealer groups and licensees will look to outsource their training and assessment requirements under PS146 to organisations such as IntegraTec or NIBA others, particularly large companies, may choose to educate in-house.
Neil Macdonald, manager of the Wallis reforms implementation team at Mercantile Mutual, says the most likely option for larger firms is to register with ASIC as an approved training organisation.
“Merc probably will become a registered training organisation,” Macdonald says.
“As organisations get bigger it’s not a bad idea anyway – for example, AMP and AXA have registered already.”
Macdonald says economies of scale and the ‘shared services’ model Merc has adopted for all its groups make this the likely course of action.
However, the company is holding out on a final decision until the final shape of the Financial Services Reform Bill (FSRB) is known.
“We believe that the implications of PS146 should be harmonised with the FSRB/CLERP6 requirements,” Macdonald says.
“We don’t want to push through changes today when it might be a different situation tomorrow.”
In the interim Merc has been informing its advisers of the need to start planning an education process now and is sending out details of appropriate courses.
“We’re not saying it’s compulsory but that they should do something now.”
Prowse agrees that all those affected by PS146 must develop a sense of urgency.
“From what I’ve seen institutions range from being prepared for PS146 to not prepared at all,” Prowse says.
“There’s lots of work to do and if they put it off much longer they’ll have great difficulty meeting the deadline.”
Breakout story.
In a rare show of unity some of the largest financial services companies have co-operated on a statement to help multi-agents come to grips with PS146.
The common statement to multi-agents has been signed off by many of the major players in the industry including Norwich, Zurich, Mercantile Mutual, Tower, and Royal and SunAlliance.
Richard Hoskins, manager training and compliance Royal and SunAlliance, says the common statement is an attempt by the industry to inform multi-agents of their obligations under PS146.
“It’s a non-competitive issue. Agents have to comply with PS146 regardless of who they do business with,” Hoskins says.
He says the impact of PS146 on multi-agents who don’t hold proper authorities has been one of the “hot topics” in recent weeks.
“There may be thousands of multi-agents who don’t hold proper authorities and it is up to the fund managers and life companies to let them know they must comply,” Hoskins says.
However, he says it is up to the multi-agents themselves to find a way to meet the new educational guidelines, whether that is through assessment or gap training courses.
“It shouldn’t be overly difficult for most to comply now that ASIC has pushed out the deadline to June 30 2002,” Hoskins says.
“At the end of the day if multi-agents wants to stay in business they must comply.”
