With the passage of the Professional Standards legislation, the major employers have already set about de-risking their planning exposures, Mike Taylor writes.
How many financial planners are continuing to operate in Australia with no more than the baseline knowledge acquired as a result of completing the RG 146 requirement?
The bottom line is that no one, including the Australian Securities and Investments Commission (ASIC) can actually definitively answer that question.
But what is certain is that a significant number of Parliamentarians, including the Prime Minister, Malcolm Turnbull, believe that RG 146 qualifications can be obtained by doing as little as eight hours’ work.
This was reinforced in late November, last year, when the deputy chair of the Parliamentary Joint Committee on Corporations and Financial Services, Labor Party Senator, Deborah O’Neill, asked the following question in relation to the banks and bank-employed financial planners:
“Can I just find out the flow in terms of banks sending people to get an RG 146: how many of them are doing their training in-house, how critiqued it is, how many people are picking up the very cheap eight-hour online version and are essentially able to set up their own financial services, get their licence and go out and give dangerous advice. What is happening with RG 146? The end of it has been long delayed”.
Implicit in Senator O’Neill’s question was the belief RG 146 was not only an inadequate qualification for a financial planner but that it gave rise to bad advice.
Little wonder then, that when the Parliament passed into law the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, the Financial Planning Association (FPA) chief executive, Dante DeGori took to Twitter to declare: “Finally we can relegate RG146 to the sidelines...degree qualification & codes of ethics for financial planners is the future!”.
Significant as well, was the announcement contained in AMP Limited’s full-year results that the company had “deliberately reduced adviser numbers by tightening the classification of authorised representatives”.
At the same time it said a higher than usual number of advisers had decided to retire or leave the industry in the face of challenging industry conditions and increasing education and professional requirements.
In a very real sense, the AMP Limited announcement had to be seen as a bellwether for the major employers in the financial planning industry and the risk management practices they have seen fit to employ in the wake of the controversies which have impacted the sector over the past five years.
Simply put, companies have been seeking to de-risk their planning ranks and educational qualifications are being used as a mechanism for achieving that objective notwithstanding the fact that a number of recent planner miscreants were degree-qualified.
What needs to be understood about the new Corporations Amendment (Professional Standards of Financial Advisers) legislation is that it entails a continuing role for those holding RG 146 status but the Australian Securities and Investments Commission (ASIC) will be lifting the underlying requirements of RG 146.
Thus, RG 146 will still set the education and training standards for those advisers who provide general advice on Tier 1 products to retail clients and those who provide personal or general advice on Tier 2 products.
When Senator O’Neill last year posed her question to ASIC, the regulator responded that it had no information about how the banks trained their planning staff and that she would be better directing her question directly to the banks.
What it did say, however, was that in terms of the number of new advisers in the industry, information provided by licensees for the Financial Advisers Register indicated there were 1,542 advisers who first started providing advice in 2015, and 2,785 advisers who first started providing advice in 2016.
ASIC did not say how many of that number were degree-qualified or how many held their status by virtue of RG 146.
In the weeks since the Government’s Professional Standards legislation was passed, what has become certain is that neither side of the Parliament is interested in turning back and that the banks and AMP have already factored the changes into their hiring and retention policies.