Education that will shape financial planning

While education has long been the yardstick by which advisers are measured, the bar has been raised and standards have become more widespread than ever before. As Jason Spits explains, education has changed the face of the profession. 

While school children of the 1980s were happy to chant “we don’t need no education”, their children appear to be affirming the opposite, particularly in the area of financial services where increasing numbers of people are seeking education. 

According to Kaplan Professional chief executive Brian Knight, enrolments for the company’s financial planning courses in January and February of this year are up 30 per cent on 2013, reaching record levels for new enrolments. 

This is good news for the advice profession, which needs to both replace retiring advisers but also expand its presence beyond the limited number of Australians who receive advice. 

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Given that the median age of a financial adviser is 50 years, the news that nearly 70 per cent of those enrolments were under the age of 35 further confirms the rise of the next generation of younger and more educated professional advisers. 

At the same time the gender imbalance which has long been a part of financial advice appears also to be shifting, with Knight stating that 40 per cent of enrolments for 2014 are women. 

It is a shift which is carrying over into the recruitment sector as well, according to Robert Walters financial services operations and financial planning manager Pamela McDonald, who states that job seekers now hold higher levels of training than five years ago.

McDonald said this was to be expected from graduates, but the trend was also appearing among more experienced planners who had seen they can no longer rely on past experience alone. 

“Graduates are not as green as they have been in the past and usually have a recognised degree in financial services as well as some experience. More senior candidates are also coming with formal qualifications, demonstrating they have committed the time to educate themselves,” McDonald said.  

“We noted the beginning of this shift after the global financial crisis but it has picked up in recent years, with many employers not even considering candidates with low levels of education or experience. 

“Market perceptions have also changed, with higher expectations for people giving advice that they will be compliant with investment risks and products – and this is being reflected in the qualifications that are being attained.” 

While the growth in the number of higher educated planners is to be expected among those starting out in the profession, licensees are also reporting that more planners who are already working in it have also chosen to improve their own education standards. 

Amelia Constantinidis, the director of AMP Horizons, which trains planners for the AMP-owned licensees, said that over 70 per cent of its intake had a degree qualification and that 20 per cent had a masters level qualification of some sort – and that number was rising. 

With the target age for Horizons set at 30-to-50 years old, Constantinidis said the higher levels of education among this group was evidence of a wider drive in financial advice to improve the profession as a whole and the individual practitioners within it. 

BT Financial Group practice and professional development senior manager Melinda Bance said the rise of the importance of education, the increasing presence of women in the advice profession and the push for professionalism have all come together at an opportune time. 

“This demographic change is taking place at an interesting point in the industry and over the last two years there has been a growing recognition of financial planning advice as a profession defined by the quality of the advice provided and the education of the adviser,” Bance said. 

“There has been a move away from the previous sales culture and this appeals to women who are also moving into frontline advice roles and not just support roles. While they are coming from different backgrounds the same education and professional standards are equalising their roles and promoting the place of women in financial services.” 

For Constantinidis this demographic change is just reshaping the advice sector to be more in line with the public that it works with each day. 

“We have been working hard to get diversity within our planning groups because this reflects the wider community as does the presence of women in the workforce and those who are career-changers looking for new opportunities.” 

At what cost? 

While these natural changes have been taking place, planners have been occupied by those innovations imposed by regulation and legislation which have set the bar on compliance, professionalism and education higher than ever before.

While the Future of Financial Advice (FOFA) reforms have driven costs up in many sectors, it appears that education has not been one of them, with entry-level education costs remaining static. 

Knight said that his organisation had not raised costs for those courses aimed at making people RG146 compliant. Thus the Diploma of Financial Planning and Advanced Diploma of Financial Planning have been priced at about $500 per unit for the past four years. 

“Costs related to higher education have climbed and are much higher than the RG146-compliant education, but aggressive pricing in the registered training organisation space has kept prices competitive,” Knight said. 

The head of Campus AFA (the Association of Financial Advisers education program) Nick Hakes said that ongoing education had increased in price but this was due to the increased rigour and standards being applied to further education in the advice sector. 

“We deliver a masters level unit for our Fellow Chartered Financial Practitioner (FChFP) designation at $980 per unit but it is half the cost of doing that same unit at university.” 

“We have found that planners will pay that as an investment in their own professional standards and have embraced and not avoided the work and the costs related to education. At the same time we want to ensure any education is relevant, valuable, adviser-specific and not cost-prohibitive.” 

Knight said costs had been driven down by the online provision of entry level and ongoing education and that those who opt for older-style workshops still paid a premium for that face-to-face time. 

“We have seen a shift from the workshops of the past with the preference for online education, not only from a cost basis but because the overall quality of online education has gone up substantially,” Knight said. 

“It also provides greater access for more people who are working, with about 30 per cent of our students stating they are working while studying.” 

Knight also states those who take this route will often have their employer pay for their course, with many tracking their employee’s studies but that there was also a growing number of people paying for their own courses. 

“Some licensees pay up front while others pay when the employee successfully completes the course, but there is a big shift towards people investing in their own education, either as self-employed people, or outside the education provided by their employer.” 

While educators such as Kaplan and Campus AFA are able to quantify the cost of advice per unit, the numbers become less clear inside licensees who bundle ongoing professional development and education costs with other supplied services. 

Constantinidis said the cost varied as each planner carries different skills sets that need to be assessed and maintained. 

“They can also source education from a number of different sources such as internal training, professional development days and continuing professional development programs which are paid for in different ways. 

“We also encourage degree-qualified planners to attain the Certified Financial Planner (CFP) designation from the Financial Planning Association, but any initial and ongoing costs for that are borne by the planner.” 

According to Bance the difficulty in pricing adviser education within a licensee at the individual planner level is due to the cost of separating what is required to meet the minimum regulatory requirements and what is required for an adviser to self-invest and provide better advice. 

“The amount of work to comply with FOFA and the Tax Agents Services Act (TASA) has seen a shift in financial advice, with planners starting to specialise as they realise they cannot be all things to all people.

"Some will continue to be generalists who refer clients but this will create different costs in education at the practice and licensee level,” Bance said. 

However there is a way to gauge the value of education, or the return on investment in the adviser, according to AMP Financial Planning executive director Steve Helmich. 

“The outcome of the education process should be evident in the level of retention and the depth of the relationships the planner has with their client. The levels of referrals would also be a useful indicative measure, but how often the planner does not get into trouble is also a good indicator of their training and professionalism.” 

Raising the bar too high 

Hakes said that while education had become a central defining aspect of financial planning advice, there would be those who would struggle to easily find their place in the new landscape – but they had been offered a reprieve. 

“As financial planning and advice moves to become a profession the standards increase, and if we look back at the Financial Services Reform Act we see that it too reset the bar a little higher than it was before,” Hakes said. 

“It is a natural progression in the profession, and planners that cannot comply may face suspension or supervision until they can meet new standards.” 

Constantinidis said it was unlikely many planners would refuse to improve their own education because to do so would shift them out of alignment with their peers and with their licensee.

“Our planners commit to certain levels of training, but every planner knows the industry is changing and would attempt to keep their own standards up to date. We have put in high hurdles and if a planner can’t meet those then maybe they should realise planning is not for them.”

Bance said this was an issue that was more likely to face with advisers approaching retirement, but even in those cases advisers could be teamed with others to ensure advice was compliant while they undertook recognition of prior learning (RPL) testing. 

“RPL is not a free pass and RTOs have high standards, but it is one way of ensuring some advisers can continue to provide advice and pass on the soft skills they have learnt.

"Alternately licensees may have to have those quiet conversations and ask them to met the new standards or consider stepping out.” 

Yet there is one hurdle that is slowing down the education uptake within financial planning, and that is the absence of an up-to-date training register tracking the education of advisers across the industry. 

The Australian Securities and Investments Commission (ASIC) stopped maintaining the only industry-wide register last year after it admitted it was out of date and many of the courses listed had not been assessed for some time. 

While financial planning licensees have quickly moved on and started to track their advisers’ education, it has become incumbent on planners to do the same. 

Helmich and Constantinidis said AMP checked RG146 transcripts throughout its recruitment process and anything that did not match would preclude further action with the group.

Bance said BT was doing the same and had to assess qualifications gained on courses from education providers that no longer existed. 

“It is important that licensees do this work to avoid any divergence in standards and so we are spending more time and costs working through transcripts and RTO information and are requesting that planners maintain their own education records as well.” 

However Knight believes the death of the old register was not a loss, given its age and the uncertainty around the information on it. 

“The old training register did not guarantee that a course listed was of sufficient quality or that the RTO who offered it had met the increasing standards of the industry.

"What is has done is push more licensees to use RPL testing and then to ensure they are educated at the latter standards which have been adopted,” Knight said. 

According to Hakes, given the focus on education, standards and professionalism, the financial advice sector should consider building and maintaining a new register regardless of whatever further changes take place in education. 

“ASIC is considering an exam to assess new advisers and if we end up with an exam for new entrants then we will have to work with that, but we have to do so in light of how industry and consumers can assess all those providing financial advice. 

“The purpose of FOFA was to increase confidence in financial services and advice and the question still remains about how we will link adviser education, training and professional standards.”