The office of the Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume is leaving financial advisers in no doubt that the underlying rules laid down by the Financial Adviser Standards and Ethics Authority (FASEA) remain in place irrespective of FASEA’s functions being devolved.
A financial adviser who wrote to Hume’s office this month questioning recent statements by the FASEA chief executive, Stephen Glenfield, and asking “what happened about sorting out FASEA” received a formal reply which left him in no doubt that nothing had really changed in terms of the Government’s expectations of financial advisers, including passing the exam before the end of this year and gaining an appropriate tertiary qualification.
The following represents the letter sent to the adviser questioning the fate of FASEA:
“The Morrison Government is committed to raising the education, training and ethical standards of financial advisers. The Government undertook these reforms in response to the urging of the industry itself, who raised concerns with the prior education and training requirements for financial advisers and expressed a desire to professionalise.
“These reforms aim to engender change in the industry to transform it into a true profession that consumers have trust and confidence in, while maintaining the affordability and availability of advice.
“The compulsory education requirements cover a defined body of knowledge intended to underpin the profession and the professional’s capacity to competently practice. Like the medical and legal professions, the new model for the financial advice profession will ensure that all advisers have the same base of general knowledge, regardless of whether or not they choose to specialise. Professionalising the financial services industry requires lifting the bar for education requirements for all advisers.
1. The Government also recognises the need to ensure existing advisers have sufficient time to meet the new standards. In June last year, the Government passed legislation to provide additional time for existing financial advisers to meet the qualification and examination requirements set by FASEA. Existing advisers must complete the exam by 1 January 2022 (one additional year) and meet education requirements by 1 January 2026 (two additional years). Existing advisers are able to attempt the exam in every second sitting, and so with six exam sittings scheduled for 2021, advisers who have yet to pass the exam still have three attempts in 2021 to pass the exam, provided they enrol in one of the first two sittings in the new year.
2. Unsuccessful candidates are able to resit the FASEA exam and these candidates receive guidance on which knowledge areas they need to improve to enhance their ability to pass at a future sitting. If a candidate has clearly underperformed on one knowledge area versus others, they receive advice to revise that particular area. If a candidate has underperformed across all areas consistently, they will be advised to revise all knowledge areas.
The Government is aware that, in some cases, advisers will be impacted by the reforms and will have to manage their professional and personal demands while also undertaking further study. This is why we have taken the steps to provide additional time for existing advisers to fulfil these requirements.
It is also why the Government has provided for appropriate recognition of the experience of existing advisers. While new entrants must complete an approved bachelor degree (24 subjects) or above or hold an equivalent qualification, existing advisers need only complete an 8-subject graduate diploma (at most), in recognition of the experience of existing advisers.
You may be encouraged to hear that the Morrison Government has announced that we are streamlining the number of bodies involved in the oversight of financial advisers, resulting in FASEA being wound up. The Government will also move the standard-making functions of FASEA to Treasury, with the standards to be set by legislative instrument. Remaining elements of FASEA’s role, including administering the adviser examination, will be incorporated into the mandate of the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investments Commission (ASIC).
To be clear, existing advisers must still complete the exam by 1 January, 2022 and meet the educational requirements by 1 January, 2026.
The Government believes there is reason for optimism in the sector. While the scale of changes the industry is undergoing can be challenging, ultimately, strengthening the financial advice sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions,” the letter said, finishing on the note that “Hopefully this information will be of assistance”.