‘Degree equivalents’ no match for planning degree

Exemptions from proposed higher education standards for financial planners are ‘ludicrous', the managing director of a financial services training firm believes.

Mentor Education principal, Dr Mark Sinclair, said ‘degree equivalents' provided to planners who complete industry association programs were no match for a fully-fledged 24-subject financial planning degree.

"While acknowledging there is angst amongst some sections, the reality is the financial advice industry simply cannot progress further, and take its place alongside trusted advisers such as accountants, lawyers, doctors, teachers, etc., without appropriate and benchmarked higher education academic qualifications," he said.

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"Whilst some important details are being worked through - such as what kind of qualification will apply to what kind of adviser - most of the parliament, professional industry member associations and key stakeholders support the effort to create better standards. It will catalyse long-term positive change across the industry.

"The new education requirements should be contemporary and appropriate to both existing advisers and new industry entrants.

"For established advisers it should acknowledge their experience and provide a framework around their hands on knowledge and depth of expertise — a framework they can leverage to further enhance their business success and client advice endeavours.

"New entrants will benefit with a qualification that will underpin their on-going professional and self-employed careers."

Sinclair said that any new legislation should "Not have any so-called ‘degree equivalents' — such as an industry association four subject post-nominals".

"These four subjects, together with the eight subjects in an Advanced Diploma can provide credits/exemptions towards a 24 subject Bachelor's degree, but it's ludicrous to call them a degree equivalent and will only leave the industry open to further ridicule," he said.

Sinclair added that no new hurdles should be put in place for those wishing to provide "limited advice", and the any training must be "manageable, flexible and affordable", while continued professional development must be linked to renewal exams every three years, to ensure advisers keep abreast of the ever-changing legislative and knowledge requirements expected and required of an advice professional.

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Degrees used to be 30 subjects, these days 24 is just a degree. DFP 1 - 4 is a useless entry and must be expanded. DFP 1-8 should be the minimum and for mature advisers, a pathway that is achievable should be set in place. No argument that new entrants must have a degree plus professional year plus added segments such as SMSF etc before they are let loose in the world. To suggest ALL current advisers must have a degree is not achievable unless a bridging course is available. Presently there are zero guidelines as to what is acceptable wrt those who hold degrees such as accounting as being accepted. The framework or guidelines don't exist at present so any speculation is just that-as can be shown by the comments by advisers and education providers such as yourself

One thing that I've yet to see from the vast amount of non-planners that write about planning, yet have some link to advice (training companies, manufacturers, business coaches etc) is their expectation on what the general public will pay for advice.

Mum and dad with 2 kids and a mortgage currently expect that advice is less than $1,000. Will being seen as a lawyer/doctor suddenly mean they're willing to pay $4k-$6k for strategic advice? All the commentary I've seen points to no.

Good point Jason. Doctors can see 20 patients a day, write 2 lines of notes, dispense advice and charge $200 or less for the experience per hour. We can see 2 if we are lucky! If those that 'qualify' didn't have to write SOA's in their current form, advice would be a lot cheaper and far more acceptable, but the Corps act needs to change and that's a big ask.

Not even that, the silver bullet in the doctor case you mention is that most or much of that is covered by Medicare. I'm sure a lot less people would go to the doctor for anything and everything if patients self funded if all in exchange for not paying Medicare.

Exactly what I've been saying for awhile - Forcing advisers into degree and post grad degree study just to keep their jobs with potentially lower earnings capacity, may see an exodus of quality. Instead there should be a carrot - SOA exemptions for various education levels. Give advisers a decent incentive to further their education and provide quality efficient advice to more people. Those who choose not to study can exist under current standards and potentially see business volumes fall.

"Exemptions from proposed higher education standards for financial planners are ‘ludicrous', the managing director of a financial services training firm believes" Vested interest much? If I ran a training firm I'd say the same.

I recall flying form Sydney to attend an exam in Brisbane on one of the subjects, part of my CPD course.
I was surprised at the light hearted mood of the, mainly young, group, of students.
I revised my notes amid great hilarity from the "crowd". The mood drastically changed when the examiner walked in and told us to put away all books, laptops,etc. No more hilarity!
The question was raised: We thought this was an "open book" exam, is that not so?"
The examiner was deadly serious!
I found that the younger set were mainly bank employees.

DFP 1 to 4 is a drop in the ocean compared to a fully fledged degree, I think people agree with that. However this isn't the point, the point is to be a good planner you need to have morals and ethics, this comes with peoples personalities. You can have a double major in econs and finance, however this just proves you have disclipine and can remember stuff...it dosent translate into being a good planner. Of course the good Dr is clipping the ticket on the education so he would call for more. Self interest abounds in this industry, whenever anyone says anything you need to look at what they want out of it as you can be damn sure they want something. I have seen people in this industry that have their heads so far up themselves clients cant even understand what they are talking about, they spout this and that , to prove that they have the knowledge. However most cases the clients just didn't feel comfortable with this person, so its not all about education, its a whole raft of skills you need to be a good planner. "Leave this industry open to further ridicule", that in itself turns me right off this bloke.

I wonder if "Mentor Education" was an unsuccessful tenderer for an industry association training program in the past?

If he's having a go at the FPA's CFP program, that's run by Deakin University.

To be upfront I agree with and support the raising of the entry standards for new advisers as a means to weeding out ill educated and mercenary advisers. The dedication to complete the additional training will I believe weed out many of the salesman planners as they wont have the patience to enter the profession - it will be much easier to stay in used car sales. However...

Over my career I have completed an Associate Diploma in Business (16 subjects / 2 years full time study), the original Deakin University DFP program (8 subjects, equivalent to 1 year full time study), the CFP program (4 subjects), 15 years of 40+ hours per annum of CPD, plus multiple other specialist courses - and yet now after 10 years of running my own successful practice I'm being told that I'm not qualified to look after my clients...

Obviously my thoughts come with a degree of sell interest, but all other things being equal, does the government really think that the advice from the kid with the economics degree would be better than I can provide?

I have some sympathy for the position given the study you've done. THey need a reasonable transition. Similarly though, I've done all of that you have but I also saw the writing on the wall re all this and did 12 Subjects to get a Masters. Now, I think as per elsewhere, I should get some sort of benefit from that, including a lower compliance regime of sorts related to advice provision requirements. There has to be some sort of tiered reward system.

you know what they say - those that can do
those that cant- try to teach.

My own experience is that academics / teachers make the very worst of clients - they appear to be across the understanding of a part of the technical issues at hand - but inevitably academics/teachers as clients as a general rule lack the ability to actually do anything - I am sure many advisers would have had the same experience.
To be now lectured by one who purports to be educated I find rather amusing - that is leaving aside he has the solution to a manufactured issue.

To my knowledge, and borne out with experience, there are equal amounts of EQ required as to an equal amount of theory - and I say theory, because for the most part it is evident that the theory component is constructed in an ivory castle well away from financial planning that has those pesky thing called clients and real life situations.
Academic (or demonstration of academic understanding) is only one part, and I would hasten to add a minority part ) of the professional perception.
I think we are talking about perception against measured performance - because that is one thing academics refuse to do is measure their own performance - so how could you draw a meaningful metric of an advisers performance - number of clients, profitability of business, exclusion of complaints, the list is endless.
I have yet to see one concern raised as to the competence of the technical advice provided in any of the recent issues. ie will the strategy work - so its not technical mastery that is being challenged - what is being challenged is moral hazard risk - that is - is the proposed action relevant to the client - and is it in their best interests.
No amount of sitting in a classroom being lectured at by ivory castle types will address that issue. So why it is thought a degree - would make this a better outcome has yet to be demonstrated.

I think our academic providers (read support team) - are at best they are an enabler to the financial planning processes undertaken by advisers- I dont seem them to be of any particular value - the gradutes we see in our practice with fresh business degrees are of varying standard - and in all honesty looks like a default option for most - a bit like the arts degree of old -( do you want fries with that.)

We have a long way to go - mandating recent tertiary study has no evidenced based support - it doesnt help when a provider becomes sanctimonious.

meanwhile - I'll get back to those pesky things called clients with real life problems

Planner education issues extend well beyond the minimum benchmark requirements. There is no question about Financial Planners requiring a minimum level of qualifications before they can provide advice to clients about their future financial well-being or in some cases, advising the best way for them to recover from a previous financial disaster.

Clients often have no idea about the quality of advice they are receiving so to protect people from incompetent practitioners, a minimum standard of education and other related skills and safety mechanisms are appropriate.

On the other hand, the barrier to entry into our profession is currently quite high despite relatively low educational standard requirements. Without sponsoring from a bank or other dealer group the only other avenue available to newcomers is to be mentored by an established financial planning practice. Having attempted two (failed) costly mentoring processes in the past, this is something I would advise smaller practitioners to avoid.

I obtained my DFP8 while a mature age practising financial planner. The cost in forfeited revenue amounted to tens of thousands of dollars. While I was critical of the dealer group imposed vetting processes at the time, in hindsight it was adequate protection for the client cases I was providing advice on. Any future qualification requirements must contain provisions for such circumstances otherwise compliance costs, educational and other barriers to entry will regulate our profession out of existence.

Another question which has to be asked is, "Where exactly is all this pressure for higher qualifications coming from?" Is it all coming from educational training professionals like Dr Sinclair? I notice that Sinclair has picked up the union fund claim that higher qualifications are not necessary for those providing limited advice, a contention I find fraught with danger. I also have to challenge the effectiveness of examinations every 3 years compared to the existing mandatory annual CPD point requirements.

While possibly conflicted, O'Donoghue's comments are still valid and need be taken seriously. However, as the industry is in transition, I believe his well intentioned prescription is unrealistic and would unnecessarily punish good advisers. Why? To demonstrate to public that we're worthy of their trust? Wall Street is bursting with Harvard business grads, but I don't see much love or respect going their way either, so let's not up skill for the wrong reasons.

As a pragmatist, I don't expect public mistrust or ridicule to end in a hurry, because these things take a generation to change, if ever. Thankfully, as I don't need universal approval, that's ok by me - my clients know and trust me, and that's enough. And unless you're working for Medicin Sans Frontier in a war-zone, I suspect that people will always be criticised for what they do, regardless of their chosen profession, that's just human nature.

I strongly support higher education standards, and a timeframe to accomplish it. But until we reach that perfect nirvana, we also need to accept a lack of uniformity for much longer on this issue, and protect experienced, quality advisers, along with the businesses they run and the people they employ.

I entered this industry 12 years ago with a Bachelor of Economics and an MBA as well as 25 years solid business experience. To "qualify" I needed a 4 subject diploma completed over 4 weeks tested with an open book exam - then and now I thought this was a joke, but I did it and then over time added to my FP knowledge. I believe the advantage I had was not so much the technical skills but the fact I wanted to do the right thing by clients and make a difference to their lives. I am an SSA and soon will be CFP; I am doing CFP not because I think its essential - but it has been worthwhile because I'll never know everything technically - but because in the future like other professions this sort of accreditation should be the minimum required to practice as a FP; accountants and lawyers need a practicing certificate which requires professional accreditation so why shouldn't financial planners. But to suggest people with long and diverse FP experience should hold a degree just to continue doing what they are doing well already is rubbish and smacks of self interest. Lets be clear MOST planners are professional and do a good job, like any industry there are some shonks BUT these are a small minority. There has to be a way of providing a solid accreditation standard to already experienced and technically proficient planners without requiring everyone to get an undergraduate degree. There also has to be a simple way to get rid of the dodgy planners. This country has an unnatural fetish with useless pieces of paper and so called "levels of competency".
Unless I am mistaken - and I am happy to be corrected - when education standards for accountants and lawyers were raised from diplomas etc and articled clerks, the professional bodies did not require experienced practitioners to go and do a degree. There were appropriate checks put in place and where someone was not up to the standard they had to get there but people already appropriately skilled were recognised.

Its a great point Clem and should be raised with the powers that be. Many of the old accountants did night classes and got a certificate and then practiced with a senior person, but they were mostly given 'Accountant' or CPA status I think, no transition, no mandatory degree. and 2 generations later no one remembers, and the full next generation all have degrees, they need to think very long term about this and not jump to each and every lobby group's whim

I agree with you Clem and have a 'similar' story. I was put through a fast track 'adviser' program at one of the Big4 and also completed DFP in a few months. I then became an 'adviser' at 23 with no experience and 4 pretty easy subjects. Looking back now I'm actually embarrassed that a) the bank allowed this, and b) that the industry allowed this (not that I did anything wrong). After building relationships with more senior advisers in the industry I decided to further my studies to the point I've now completed a Masters in Applied Finance and about to complete CFP.

I disagree with those that say existing advisers should have to complete further education, I've met and reviewed SOA's done by more 'senior' advisers, some of whom have had over 30 years experience, whilst they had really good client relationship skills, their SOA's and advice were terrible! Even basic things like CGT consequences these advisers couldnt work out, or the fact that a TTR pension used to pay off a mortgage for a high income earner under age 60 with 100% taxable component in super can actually put the client in a worse tax position (if not salary sacrificing). In my experience these 'more experienced' advisers hear of a 'great new strategy' and immediately want to get their clients in to sell it to them and to show the clients how smart they are, when in actual fact these advisers have lacked the skills to properly assess strategies and how they apply to a clients situation.

Even situations like Storm 'may' have been prevented to some extent had the 'advisers' had greater education levels. Yes many of them were CFP, but many of them were grandfathered CFP's. If they had learned more about market theory and investment concepts 'maybe' they wouldnt have been so quick to double gear etc.

correct info re accountants etc. One must ask who pushed the barrow to include ALL planners. I wonder if it was one or two of the big 5 to deflect the major issues at the time. CBA comes to mind
The one point you made regarding the DFP-4 weeks. The original DFP subjects were much longer and proper. ASIC let these short courses in under RG146 and your description says it all-a joke- and there is a good reason for the issues we have now.

I was an Adviser for many years and now operate in the RG146 training space. I believe a Degree for new entrants and a 'Degree equivalent' pathway for existing Advisers is a great idea. I think the Professional Year concept is long over due and will add real value. I realise this, and other proposed changes, will hurt my business as an RG146 training provider, however it really is for the greater good of the FP industry. It is disappointing when vested interests (ie Mentor and Mark Sinclair) dress up 'concern' for limited advice Advisers to feather their own nest and try and keep their courses relevant (so they can continue to sell them). Does he not know only the client can limit the advice being sought? Granted an Adviser Letter of Authority may limit what they can give advice on and that is when we get in to the discussion about 'limited advice versus product flogger' - Dr Sinclair should know that from his own course materials - that is, of course, assuming they are up to date?! It's also interesting that Mr Sinclair is now slating 'association post-nominal qualifications' given he was heavily involved in the development of one, however Mentor is no longer associated with it's delivery.

If they want to up the ante on compliance on the front end (ie. training) then they should lower the ante on the back end (i.e. SOAs, should be replaced by good file notes).

I've just implemented a Will, Enduring Power of Attorney and Enduring Guardianship through my lawyer for $2,000. Did he sit there producing an SOA? Of course not.

Meanwhile, the medical specialist we saw recently charged $400 for 1 hour. Did he provide a 30 page SOA? Of course not.

Meanwhile every interaction can now be recorded via cloud software or even voice recordings. So what is the point of the 30-50 page SOA? It's anachronistic.

All very good to embed professionalism, but if it's not commercial, consumers won't pay for it.

You have pinp ionted the exact issue that started this whole change.
BANK advisers who get it all wrong. COMPLIANCE ratings obviously not picking up these issues or is it the old school syndrome - big earner- big flow on up the chain so let it go. Your employer at the time obviously has a culture issue and that needs to be stamped out. All the education in the world will not change this fact. ASIC should take note and act. In the meantime lets get on with business and let the wrong people make decisions.

Revolt...wouldn't be wonderful if all members of the FPA, AFA, whatever other Assoc exist, decided to not deliver so called 'compliant' advice i.e. SOA's when unneccessary, etc etc and we just decided collectively to act professionally. The Dealers and ASIC and Govt would have no option but to talk to us sensibly, otherwise the courts and institutions would be jammed as they tried to deal with all of the non-compliance. A dream I agree, but collective action might be the only thing that will give us a chance.

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