The Government’s response to the Financial System Inquiry (FSI), to lift education standards of financial advisers, has been welcomed by numerous industry bodies.
The education reform means financial advisers need to have a degree, pass an exam, undertake ongoing professional development, subscribe to a code of ethics, and to complete a professional year.
The Financial Services Council (FSC) said the government’s recommendations for financial advice, life insurance, and superannuation would lay a strong blueprint for future generations in the accumulation of wealth for their retirement.
FSC chief executive, Sally Loane, said “the bar has now been set for the financial advice sector to evolve into a profession. High quality outcomes for consumers must be the focus for advice and for maintaining consumer confidence in the financial advice industry”.
The Financial Planning Association (FPA) chief executive, Mark Rantall, also welcomed the education standard lift and said it was a win for consumers.
“We are delighted that the Government has listened, will consult further and then legislate to put in place needed measures to meet the financial needs of all Australians,” he said.
In terms of life insurance, the FSC said it was pleased the government would continue to lead reform on the sector.
“When implemented, this package of reforms, which includes reduced commissions, extension of claw-backs to three years and the introduction of an industry-wide reporting regime, will substantially benefit consumers,” Loane said.
The FSC also welcomed the commitment to introduce a rationalisation mechanism for legacy life insurance products.
“It is a timely reform that will help reduce barriers for consumers accessing contemporary products and will reduce industry costs,” she said.
The Association of Financial Advisers’ (AFA) chief executive, Brad Fox, said it supported the vision for a competitive, efficient, and transparent financial system, including freedom of choice on super.
On education, Fox said the AFA’s members wanted to improve the understanding and perceptions that consumers have of financial advice.
“Raising educational and professional standards plays a big part in that. We look forward to working with the Government and other industry stakeholders to embrace higher standards,” he said.
The AFA also said it wanted to remain in discussions on the detail and implementation of the Life Insurance Framework.
“Ensuring fairness and balance is important for all parties – consumers, insurers, and financial advisers, espeically those who own and advise in small businesses,” Fox said.
Meanwhile, the Australian Bankers’ Association said it welcomed the Government’s recognition that banks are fundamental to the broader economy.
ABA chief executive, Steven Münchenberg, said higher capital requirements would contribute to making an already safe system safer, but there would be costs across the system.
“We also support removing regulatory barriers to innovative disclosure in banking and financial services. The majority of bank customers are using digital and online channels, so making sure the law keeps up with the pace of technological change and customer expectations is important,” he said.
“Raising the education, ethical and professional standards of financial advisers and introducing a new power for the Australian Securities and Investments Commission to take action against managers of financial advisers will be key elements of professionalising financial advice.”
Key Government announcements on financial planning reform included:
- Financial planner education standards will be raised to a relevant tertiary degree for new advisers;
- Financial planners will be required to pass an exam, complete ongoing professional development, subscribe to a code of ethics and undertake a professional year;
- The current ASIC financial adviser register will be enhanced to include relevant bans and disqualifications or code breaches;
- The terms financial planner/adviser will be restricted to those listed on the register; and
- Legislation to bring this to effect will be introduced by mid — 2016
