The actions of the Financial Adviser Standards and Ethics Authority (FASEA) with respect to financial planner education pathways may have gone further than was intended by the Federal Government, according to the Association of Financial Advisers (AFA).
In a detailed submission in response to the FASEA guidelines, the AFA has urged that there be closer reference to the Explanatory Memorandum underpinning the legislation establishing the new FASEA regime, warning that as many as 8,000 are at risk of leaving the industry.
“With the implementation of any new regime, the law is critical, however there needs to be a level of reference to and reliance upon the Explanatory Memorandum,” it said. “The FASEA proposals do not address many of the important provisions discussed in the Explanatory Memorandum. It would appear that FASEA have gone further than the Parliament had expected as defined by the Explanatory Memorandum.”
The submission said AFA research had suggested an exit rate of between 16 per cent and 45 per cent even before the Royal Commission had begun its hearings, and that education standards for existing advisers represented a particularly challenging issue.
It said the AFA believed that the existing FASEA approach had not placed an adequate focus on obtaining the commitment of existing advisers.
“If we fail to gain the vast majority of existing advisers’ commitment to this journey, then we will have failed to achieve the core objectives for the Australian population,” the submission said.
“It is important to think of this as a huge cultural change program that will only succeed if we can win the hearts and minds of the financial adviser population,” it said. “In order to do that, we recommend that the objective to retain experienced advisers is recognised as a core objective of the overall program and that changes are made to specifically focus upon this and to directly address the issues that have emerged since the consultation effectively commenced with the 14 December 2017 release.”
The AFA said it believed the process had reached “a critical inflection point” and that the next six months would most likely determine success or failure.
“While we are sure that there has been a higher purpose of encouraging or indeed enthusing advisers to embrace further education, unfortunately, any potential overall sense of positivity for education amongst existing advisers has been largely lost at this stage as a result of the high level of confusion and anxiety that has developed over the last six months,” it said.
The AFA warned that important action needed to be taken to re-engage the adviser community.