The Federal Government’s decision to make a degree-level qualification mandatory for new financial advisers from January 2019 was met with nods from the crowds and murmurs of genuine agreement.
The Financial Adviser Standards and Ethics Authority’s (FASEA’s) requirement of further pathways at a postgraduate level, however, was not as lucky.
Existing advisers, who would now be required to complete a graduate diploma comprising eight courses such as the “FASEA Code of Ethics” and “Behavioural Finance,” as well as lessons on the Corporations Act, was met with uproar within the industry.
But, perhaps the idea of further education is not as farfetched as it seems.
The planner qualifications will inevitably take the shape of the Graduate Diploma in Legal Practice (GDLP), which holds more in common with FASEA’s plans than the name.
To be admitted as a lawyer in Australia, aspiring practitioners must complete a tertiary academic program involving 11 areas of legal knowledge, known as the Priestly 11, and a practical legal training (PLT) program that may take the form of either the GDLP or a Master of Legal Practice (MLP).
The GDLP/MLP offered by the Australian National University School of Legal Practice, for example, is an online, six-month program providing graduates with the qualifications to obtain a practising certificate, and be admitted as a lawyer in Australia.
Not unlike FASEA’s eight courses, the PLT programs comprise 48 units, which consist of foundation topics like “Becoming a Practitioner” and “Ready for Practice,” and niche practice topics such as “Criminal Practice” and “Consumer Law Practice”.
On top of this, students are required to complete a Legal Practice Experience (LPE) course, which is a 20, 50 or 80-day placement in the legal profession under the supervision of a lawyer in an approved legal workplace. The length of the placement is dependent on the number of theory units completed in the GDLP.
Upon completion of the PLT program, graduates can then apply to the educational body for a Completion Letter, which is used by the Supreme Court to admit students as practitioners in an admissions ceremony.
These qualifications only allow a graduate to become a solicitor, though. To become a barrister, solicitors must then be admitted to the Australian Bar Association, which requires sitting the Bar Examination. The two, two-hour papers require a pass mark of 75 per cent, opening the gates to the Bar Practice Course, which must be completed for admission.
As requirement stacks upon requirement, lawyers across the nation probably wonder what all the fuss is about, especially given the revelations from the Royal Commission.
How is it that planners with “relevant” degrees are completely qualified to advise on a client’s particular investments? Of course, there’s an element of monkey see monkey do, and learning through doing is important, but extra educational requirements, albeit an inconvenience, are probably necessary.
The industry has been rightly defamed by the Royal Commission and is in need of a complete makeover, which is probably only possible by an uplift in educational standards to increase the quality of advice coming out of the woodwork.
If the model works well in the legal profession, and similar models can be seen in the accounting profession with the Chartered Accountancy (CA) exam, it could be time for the financial planning industry to simply follow the leader.
While the proposed FASEA scheme is not without flaws, and the argument exists that long-standing planners don’t require further education, the shape that the higher standards will take, like the GDLP and CA, doesn’t look too shabby.
But if the education component is hard to chew, the ethics component has proved a tough pill to swallow, and it’s fair to say an ethics course doth not an ethical planner make.
So, perhaps FASEA could have considered a financial equivalent to the legal profession’s Australian Solicitor’s Conduct Rules (ASCR), which were developed in 2011 by the Law Council of Australia and adopted by the nation’s lawyers soon after.
The difference was, it wasn’t necessary for lawyers to complete a course on the ASCR, but breaches of the Rules could amount to professional misconduct or unsatisfactory professional conduct. In that way, learning the Rules and studying ethics was required of practitioners, but did not stunt their practise by requiring a paid course.
While that’s just one example of an industry successfully implementing both higher educational and ethical standards (without the imposition), the proof is in the pudding.
It is worth noting, though, that the legal profession is not as plagued by constant change in policy, so the PLT programs probably suit the industry more, given constant professional development isn’t required.
That being said, while the FASEA proposals have placed added pressure on existing planners to head back to the books, the changes and requirements of new planners are nothing short of ordinary.
What the graduate diploma will offer planners, as the GDLP offers lawyers, is the practical application of key fundamentals acquired in the undergraduate degrees required by the Federal Government, and it’s time for planners to look to other models to see where the road leads.