FSC proposes new body to control education and professional standards

The oversight and control of all financial adviser education, training and professional standards should be handed to a statutory body according to the Financial Services Council (FSC), in move that may sideline professional associations seeking self-regulation.

The FSC announced the proposal for the formation of Advice Competency Standards Board (ACSB) at a media conference yesterday stating its formation was required due to the historically low levels of confidence in financial planning advice.

FSC chief executive John Brogden said there was an urgent need to build back public trust in financial advice and that would not happen via self-regulation and a circuit breaker was needed to deal with the current poor perceptions surrounding the advice sector.

The proposal forms part of the FSC’s submission to a Parliamentary Joint Committee on Corporations and Financial Services which is examining the professional, ethical and education standards in the financial services industry.

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In the proposal the FSC said the ACSB would be formed under the Corporations Act and have representatives from the Australian Securities and Investment Commission (ASIC), the Tax Practitioners Board (TPB) and industry stakeholders, with each representative appointed by the Federal Government.

The ACSB would be given control of setting all adviser related competency standards - including education and experience – a task which is currently in the hands of ASIC, as well as setting the Professional Standards and Codes of Conduct under which advisers would practice. This latter role is partly covered under law created and administered by ASIC but also by professional associations such as the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA).

The ACSB would also have the power to recognise these associations who could continue to offer and administer their own professional designations such as the Certified Financial Planner and Fellow Chartered Financial Practitioner.

Brogden said the current self-regulation model was not working, a position also adopted by ASIC in its PJC submission, and that the FSC had been in contact with industry associations about the role the ACSB would play.

He said the AFA had been realistic about the limits of self-regulation in this space but were yet to be convinced the FSC’s model was the one to pursue while the FPA “were non-responsive” to date.

Brogden stressed that while the FSC “had no agenda to cut out the associations” the public perceptions around advice remained poor which was not a criticism of the associations but a reflection that more needed to be done to move to a higher level.

“Standards need to be higher than the designations on offer and to gain trust people need to be able to trust more than the professional bodies of financial planners. The only way to restore trust is via new regime with government insight,” he said.

The FSC also stated the creation of ACSB would simplify the role of ASIC as an enforcer of the law and not the creator of it as well with Brogden stating the FSC took a ‘purist position’ in believing the two tasks should be separated.