Adviser education programs are at risk of being severely cut because the way they are being funded is seen as conflicted remuneration, according to the Association of Financial Advisers (AFA).
The AFA has used its submission on the Future of Financial Advice (FOFA) amendments to express concern that it has become too difficult for fund managers and other product providers to fund professional development days due to impediments posed by the existing training exemption.
Prior to the introduction of FOFA, dealer group-organised professional development days for advisers would be funded by product providers by way of sponsorship.
In return for funding the event, sponsors would be recognised on marketing material, have the ability to provide exhibition stands and the opportunity to provide speakers.
“Critically from a licensee perspective, this source of funding was particularly important in being able to provide strong training and education opportunities for their advisers,” the AFA submission read.
“In the case of non-aligned licensees, these programs were a central source of revenue to cover the costs involved in meeting their obligations under s912 (1)(f) for the training and competence of their advisers.”
With the ban on soft-dollar arrangements over $300 as part of FOFA, came the so-called 'training exemption’ which the AFA claims is impractical when it comes to the provision of support to licensees for education and training.
Under FOFA, arrangements whereby fund managers and other industry participants fund adviser training are regarded as potential conflicted remuneration.
Dealer groups have the ability to argue that the partner payments are not conflicted, which will involve strict rules and the signing-off on high-level legal documents.
Furthermore, sponsors will have to pay directly to a third party (event venue, caterer or speaker) rather than paying the dealer group.
“This makes it very difficult to structure a professional development program as these programs are typically agreed a year in advance, well before any specific program costs can be established,” the AFA said.
The industry body said it understood the objective of this part of the legislation was to prevent the provision of non-monetary benefits flowing through to advisers, such as attendance and travel for overseas conferences that were directly linked to sales volumes.
“The actual result of the legislation is the prevention of support for genuine training and education that is delivered in a way that is not linked to volume measures,” AFA’s submission read.
The outcome of this legislation is that many professional development programs for advisers are at risk of being severely cut, according to the AFA, which suggested allowing such partnership programs to continue.
