Advice exam has a role, but more flexibility needed: FAAA

There is still a role for the financial adviser exam, according to Financial Advice Association Australia (FAAA) chief executive Sarah Abood, but the organisation is calling for more flexibility on its scheduling.

At the start of November, The Advisers Association chief executive, Neil Macdonald, called for the financial adviser exam to be scrapped arguing it has served its purpose and is an unnecessary expense for advisers.

“The real purpose of the exam, which financial advisers first sat in 2019, was to establish a level of professional competence in the overall population of Australian financial advisers at the time, many of whom did not hold the new FASEA recognised tertiary qualifications,” he said.

“In essence, there will be no advisers whose competency needs further testing. The exam therefore becomes an unnecessary additional expense for those wanting to enter the profession, who have already heavily invested in their education.”

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Speaking to Money Management, Abood stopped short of supporting the scrapping of the exam but admitted it could do with more flexibility. 

Currently, there are four sessions scheduled in 2024 – 15 February, 16 May, 8 August and 7 November, and are all to be held remotely.

Abood said: “There is a willingness by the minister to engage on a pathway for new entrants. The challenge of the exam at the moment that we hear is around the inflexibility of when you can take it. It has to be a particular point in time of the Professional Year, and if you just miss a scheduled date with ASIC, then your Professional Year can end up taking 18 months or even two years.

“We haven’t advocated for the exam to not exist, but we are advocating for more flexibility on when it can be taken.”

She also referenced the costs imposed by the Compensation Scheme of Last Resort (CSLR) and the future levy that will be imposed on advisers.

“We don’t oppose the scheme as it gives consumers confidence. The concern we have is around the past costs and the history and what will it do with a large number of complaints from Dixon Advisory, so we are looking into who is going to pay those. 

“There is a commitment from the government to raise funding from the big 10 [financial firms] to pay some, and the government will pay for some within a certain period, and we are watching very closely at what’s left after that, and we want to make sure we are achieving lower costs for advisers.”

Her colleague, FAAA general manager Phil Anderson, previously stated that advisers are fearful about the potential costs that could arise for advisers if there is a similar 'black swan' event to Dixon Advisory in the future.

“There is a cap on any individual sector paying more than $20 million unless the minister approves it to go over, and there is an overall cap of $250 million.

“We haven’t seen anything else like Dixon Advisory in our history of EDR [external dispute resolution] schemes, and I hope we don’t again. But if we do, then those are the controls in the regime that will kick in. The minister can opt not to pass it on or can opt for a broader base of contributors to help with the costs.

“But there are no absolute controls, and we live in fear of another black swan event.”