The Financial Adviser Standards and Ethics Authority (FASEA) has confirmed the terms of the professional year for aspiring financial planners entailed 1600 hours of which 100 hours is structured training.
The legislative instrument underpinning the arrangement was released today with FASEA stating that those undertaking the professional year would be known as Provisional Financial Planners and Provisional Financial Planners once they had passed their exam which would be typically midway through the professional year.
It said after completing the exam, the provisional planners could be authorised by their licensee.
“The Professional year will be the equivalent of one year’s full-time work and it will comprise 1600 hours, of which 100 hours is to be structured training. A professional year plan will be required to develop the following competencies: technical competence; client care and practice; regulatory compliance and consumer protection, professionalism and ethics,” the FASEA statement said.
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A full year of professional development, incorporating 3 weeks of structured training, before a degree qualified planner is able to practice. How "ignorant" or perhaps less kindly "stupid" are planners expected to be when they finish their 3 year uni course?
Sort of makes the 3 year degree look very much like a "churn 'em out" exercise.
And who will pay for be able to afford employing a Graduate to make sandwiches and do filing in the office whilst requiring an adviser who should be earning fees to "supervise" this training. We have nearly 200 small financial planning businesses in our license and not one of those has put up their hand to be willing to offer a Professional Year placement.
The only advice firms with sufficient resources and infrastructure to support Professional Year placements are the big institutionally subsidised firms. And if vertical integration is banned, there will be nowhere for new graduates to start their careers.
Advisers who can survive the coming FASEA purge will have far fewer competitors!
Have the people who are making decisions about our profession ever worked in our profession? Do they actually know what is required? When I go to the specialist to see about a heart attack and I ask him what does he need to do each year to keep his qualification he tells me - he needs to achieve 40 hours of cpd points -now this guy is about to save my life. On the other hand are also saving clients lives but in a less invasive way but we need to sit an exam to be able to continue to practice in our industry do more cpd points than the specialist each year and then when we want to employ a graduate we have to put them through another exam and then 1600 hours of training - but wait there is more - how do we afford to pay for these staff if all of our time is taken up doing this study/work. Have you all gone too far? Is it time to push back and start beating the doors down in protect - my lawyer does not need to do an exam to continue to work in his field - so why are we being singled out. I would further like to point out that most of the issues at the royal commission is regards to planners in large banks - not the traditional financial planners who are here day to day helping out ordenary hard working small to medium business owners and individuals. If all the financial planners started to protect to get a voice then maybe that is what we all need to collectively do. It needs to stop - it has all gone too far.
Agree with you and there is no ability to really put on a new adviser and why would you. Putting on advisers in the past often came with a good subsidy but often they didnt make or see changes of employers as a way to climb quick. These changes will enhance the practice of employed advises jumping around. I chose not to train planners after certain events some 14 years ago. Being to encouraging and complimenting but this planner to found that she knew more than me, such was her change and confidence level. It turned bad and threats were made to me to sell to here and manipulation to some staff to take her side. (all whilst i was overseas with the birth of my first child- a mutiny occurred) Now she runs a delivery service.
Back to the topic. I wouldnt place anew planner in my practice going forward. And after 30 years, i dont really see the costs and needs of further education for me ( as a CFP and 30 years of experience with no complaints) is necessary and a distasteful test of my integrity. i never planned at 65 and 45 years of service, to have justify every move and prepare each advice tested for court action.
Please excuse the above if its not clear of my message, but I am now under care and unfit for work for the last 2 months. I don't need my health to go like this and I have a young family with one due in April. I now understand what some of my clients have suffered and the inability to communicate or make a call to a client now.
I feel the RC has possibly done much damage to Australians future in the delivery of good advice in a cost effective and timely manner. I also feel they over stepped there value and withheld evidence to media etc and the test for that was with ASIC not working for the betterment of the public by not responding to Dovers requests for feedback. I see many items as being of little to know consequence and to correct these will be far more costly than the result. The consumer will eventually pay.
should any other advisers feel unstable then please get help as i have recently. the sad thing is i fought strongly far to long and staff this week have informed me that they noted concern for me longer than 6 months ago.
My future is work in charity as I will be able to help people as this is why I first become a planner. I will be fine in the future If i can genuinely add value and change peoples lives. Compliance and regulation will not be a concern as a volunteer. Thus i wont have to charge my clients a lot more for no benefits beneficial to them.
Money is not my driver or that important, for I will enjoy charity work far better.
Congratulations to all those who have pushed so hard to see financial advice become a profession, just like doctors and lawyers. I think you are achieving the dream.
Really, what will change?
I predict a mass exodus from our beleaguered Industry and massive hikes in fees by those remaining
Having just found out my Bachelor of Commerce Degree (2006) is worthless for FASEA purposes and will not be a "relevant" degree is a clear message that any "structured" training completed is worthless. Why would a new entrant in 2020 do structured training when we've just seen with FASEA that by 2024 the rules could change again.
To existing advisers they say "structured training" and continual learning is worthless... and Degrees for all. and yet now they are saying structured training and ongoing CPD is essentially to be a fully qualified adviser. A clear money making exercise.
Welcome to the party Anne. It's all done to in the name of helping protect the retail client from Advisers that as Treasury states in a submission to the RC, Adviser's place clients into under-performing super investments (that retail vs Industry Fund thing) and it seems, no one can understand why Advisers do it - how unethical are Advisers seems to be the attitude. Never mind, as long as Industry Funds can keep pulling the wool over the eyes of regulator and "compare the pair" ads and inter-fund advice (all OK you some say as they have their name on the door) then don't expect this is the end of the regulation. I just wonder why some seem to think FASEA is the end of it? It's beyond madness now - but could it get worse? Should we stay?
It's well and truly time for an industry overhaul! For too long advisers have had their snouts in the trough that has been created by the Big4. They have actively resisted royal commissions & legislative reform & government oversight! So they continue to claim the absorbitent commissions for life. They act in self interest & NOT the clients best interest. They should be forced to contact clients at least annually (this doesn't mean sending an email) but they don't! The education standards & continuos PD requirements develop the professionalism of the industry as a whole. If you don't meet the standard - LEAVE!!! No one expects a doctor or lawyer not to comply with ethical standards! Time to get rid of dead wood baby boomer planners who pay their staff peanuts to do their admin & hard yards & prevent those with the qualifications from advancing their careers. Stop your whinging and get back to what financial advice should be - ACTING IN THE CLIENTS BEST INTEREST.
Whilst i will agree that in the past Advisers have had their snot in the truogh due to all the fees that were taken out automatically from Superannuation, such as contribution fees and ongoing fees for no service. Those business super plans were horrible for clients (the adviser never even had to see a client to get these fees).
I do think you have missed the mark with insurance commissions. If there are no commissions for insurance then no adviser will bother selling it (except to the few HNW clients who can afford $10k+ PA adviser fees). With no advisers to help people implement their insurance strategy these clients will be left at the mercy of the direct insurers and will end up with expensive junk policies which have little hope of ever paying out. When these clients come to claim they will also have to give 30% or more to a lawyer to fill in the paperwork as it is in the insurers best interest to make it as hard as possible to claim.
So if an adviser working outside the HNW market will only consider insurance if there is a kick-back (aka a commission) isn't that an admission that those advisers only work in the interests of the client when the client's "best interest" and the commission payable coincide?
What I don't get is why the pessimism regarding future insurance sales. If the personal insurance future as you see is one where consumers buy rubbish insurance sold via TV adds, and claims involve a large proportion of any payout to the "lawyer" who fills in the paperwork on the claimant's behalf, doesn't that represent a market opportunity ripe for exploitation by ethical advisers?
So let's say an adviser insists on charging an average Joe client a fee instead of accepting commission. The client's premium is reduced from $2,400 to $1,800 due to commission removal. But the client also needs to pay an invoice of $2,200 to cover the adviser's research, documentation, implementation and compliance costs. Total year 1 costs for the client effectively increase from $2,400 to $4,000 by not utilising commissions. The client says no way. It's too much upfront, regardless of what he might save in the long term. Money is tight earlier in his career while supporting a young family and paying a mortgage. He's comfortable paying higher premiums later as he'll be more able to afford it then. He walks out of the office uninsured. A few weeks later he dies suddenly leaving his wife and young kids destitute. In whose best interest is that?
I don't follow your maths.
The current premium is $2400, of which the adviser gets 120% or $2880 up front, with a further 30% (or is it more?) each year the policy is maintained. So after 5 years the client has paid $12,000 and the adviser has received $5760, meaning that the REAL annual insurance premium for the client is only $1248 -- around $1150 LESS than what the client was charged. I don't have a life table in front of me, but that $1150 p.a. excess premium could have bought a significantly larger sum insured amount for when the "client is hit by a bus".
So on your cost for the service ($2200) the client's first and second year costs would total $4696, $104 LESS than the current pricing model. How would this be an impossible sell?
I could do the sums again for the 70% upfront and 20% ongoing that will apply from 1 January, but do I need to? Your costs to provide the advice won't change, the sum insured should substantially increase for the same premium and the client's "break even year" might become year 4.
Gold!!
It would be an easy sell if your fantasy commission numbers were real, and those fantasy commissions were given to the client. In the real world commissions are 70/20, soon to be 60/20. In the real world the insurance companies reduce premiums by about 25% when an adviser chooses to forego commissions and charge fees instead. Please research the facts before you start arguing for "solutions" which will do consumers more harm than good.
So in the "real world" when an adviser declines the commissions the insurance company goes "sucker" and only lower the premiums by 25%. This is not a justification for commissions, but evidence of market failure.
so I re-ran the numbers for a commission rate of 70/20.
Under the commission model, Fact Check's "ordinary Joe's" $2400 premium is buying $1680 worth of cover. If the "excess" insurance premium is fully refunded "Joe" breaks even at the end of year 3 (almost), if the "excess" refund is only partially refunded (25% in Fact Checker's example) Joe breaks even towards the end of year 4 and the insurance executives pay themselves a higher bonus. (Conduct that might be called unconscionable.)
And bye the bye, if Joe is an Australian male 32 years old, his chance of dying in the next year is near enough to 1 in 1150.
So you're suggesting that advisers have crystal balls and can predict the future? Insurance providers sell their policies based on fear yet actuaries and assessors assess claims based on algorithms & statistics. Financial advisors take advantage of this knowledge since life events are unpredictable and claim their commissions wuthout moral judgement!
Seriously 120% 1st year premium then up to 20% ongoing commission for the life of the policy??? Commissions should be paid on documentary evidence that annual reviews have been conducted! Let's end Set & Forget policies once and for all. No wonder claims are rejected as the providers are too intwined paying commissions. Pay on client's best interests not advisers best interests. Stop the rot!!
120% upfront and 20% ongoing?? Where do I get a bit of that sweet action?? I thought no-one was paying anything more than 70/20 from next week. With 2 year clawback. Then going down to 60/20 in 12 months time.
Well thankyou for proving my point! Congratulations! This is precisely the reason why the financial services industry needs an overhaul!!
Ever considered that your rage and self righteousness is stopping you from recognising humour? Everyone in the industry knows 120% commissions disappeared a long time ago. Try to stop taking notice of the fake news. You will be better informed and possibly a little happier.
Time for the Federal Govt to come in and sack the entire board of FASEA . All Small Business people will vote the Liberals out of government at the upcoming election
HAS THE GOVERNMENT COMPLETELY LOST THE PLOT. every day, the news, on FASEA goes from really bad to really worse. Why would a graduate enter our profession, Wouldn't it be easier for them to go into medicine or law, Engineering or Accounting, What is ever to happen to our country. We are not going to survive, as for Australia's future balance of payments, wait till the billions start to increase in Centerlink payments, when they find out that no one has any insurance.any more. Look at private Health Insurance, if you make it so unattractive, no one will purchase, and the Medicare and poor public system will suffer. Long Term, we are setting the country up for a financial disaster of which it may never recover from .
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