FAAA recommends sunset clause in experience pathway

In a submission to the government, the Financial Advice Association Australia (FAAA) recommends further targets to support older advisers in the experience pathway.

On 18 April, the Treasury opened consultation on the proposed Experienced Adviser Pathway, which closed on 3 May. 

The draft legislation would deem an adviser to have met the education requirements if they passed the adviser exam and:
Had 10 years (cumulative) experience providing advice between 1 January 2007 and 31 December 2021; and
Had not recorded any disciplinary action on the Financial Advisers Register (FAR) before 31 December 2021.

The recently formed FAAA, the merger between the Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA), made a submission to the government for a better targeted experienced pathway.

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“The FAAA, including its two predecessor bodies (AFA and FPA), has long argued for both high standards and better recognition for advisers’ prior learning and experience. We also acknowledge the challenges for older advisers, approaching their retirement, in undertaking an eight-subject graduate diploma,” said Sarah Abood, FAAA chief executive. 

She acknowledged that implementing the proposal could mitigate the substantial decline in adviser numbers, which were down by 45 per cent since 1 January 2019. Specifically, it would enable older advisers who may have exited the profession to stay for longer, benefiting both the adviser and their unserved clients.  

“We believe that this measure should be better targeted to older advisers, with the inclusion of a 10-year sunset clause. This would represent an appropriate transition for established, experienced financial advisers and planners with a clean compliance record. Otherwise, we will be in a position whereby planners currently in their 30s could continue to practise indefinitely with no further qualifications required,” Abood stated. 

Moreover, the FAAA urged advisers to complete the Code of Ethics Graduate level subject as a requirement. This would ensure all practising advisers had consistent knowledge across the board. 
The CEO recognised the division the experience pathway had caused in the profession, with the FAAA’s recent survey highlighting that 50.9 per cent of members were supportive and 49.1 per cent were opposed.

“However, the level of support would grow to 70 per cent if both the sunset clause and ethics unit changes were incorporated.”

Opposing reactions were focused on fears that the proposal would undermine financial advice as a profession, alongside concerns that it could encourage students to opt out of future studies.
 
“Our message to members is that we are a profession, and your clients acknowledge this. It does us no service with consumers to create a two-tier system, using terminology that makes no sense to them. 

“Many ‘relevant’ providers are also experienced. Many ‘experienced’ providers will also have qualifications. These points were very strongly made to us by members during this consultation.”

Abood recommended that distinctions between “experienced” and “relevant” providers not be made on the FAR.

“It is time for us to come together as a profession and ensure consumers can have full confidence in their financial adviser who is registered and licensed to practise,” she continued. 

Additionally, the FAAA showed support for technical fixes to address issues with new entrants and the tax qualifications for tax agents.