Three strikes and you’re out: FASEA’s exam

Continuing in its habit of trickling out small amounts of information, the Financial Adviser Standards and Ethics Authority (FASEA) has released its third consultation paper, this one on the proposed compulsory Financial Adviser Examination.

The proposed exam, which FASEA labelled “an essential component of the educational qualifications and standards that all financial advisers are required by law to pass before they can provide personal financial advice to retail clients” would test advisers’ knowledge in the following, with an emphasis on practical application:

  • The Corporations Act (emphasis on Chapter 7 – financial services and markets) (accounting for 30 per cent of the exam’s questions)
  • The FASEA Code of Ethics (15 per cent);
  • Behavioural finance – client and consumer behaviour, engagement and decision making (20 per cent);
  • Financial advice construction – suitability of advice aligned to different consumer groups (10 per cent); and
  • Applied ethical and professional reasoning and communication (25 per cent).

Adopting a three-strike policy, advisers would be allowed to re-sit the exam two times should they fail.

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While many of the above were self-explanatory, the prominence on the Code of Ethics again highlighted just how little information FASEA had made public as there was still little information available on the Code which would be central to advisers’ qualification.

The Authority would not be providing extensive guidance to those sitting the exam.

It said that it “may” publish a recommended reading list to guide candidates but “does not intend to provide examination preparation courses”. Rather, “candidates preparing for the examination should use their judgement about how to prepare and consult their supervisor in designing a plan of study based on the curriculum”.

All advisers registered as authorised representatives prior to 31 December, 2018 would have to pass the exam before the start of 2021. From January, next year, new entrants or those returning to the industry would have to pass the exam after completing their tertiary degree and before commencing their professional year.

The exam would consist of both multiple choice and short answer questions and run for three to four hours. The pass grade proposed by FASEA was 65 per cent.

Again, the importance of the little-understood Code of Ethics was emphasised in the suggested marking criteria, as advisers would be required to achieve 75 per cent on that part of the exam as opposed to 50 per cent on the others.

FASEA was currently undertaking a procurement process with specialist service providers around the exam’s development and delivery. It expected that the exam would be sat face-to-face in capital cities, with digital delivery available for those in remote areas or unable to travel physically.

Submissions to the Authority on the exam consultation paper would close at the end of this month.

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FASEA states this applies to 'Authorised Representatives'. What about advisers who are NOT Authorised Representatives?

An adviser who is EMPLOYED by a licensee is NOT an 'Authorised Representative'. Before it starts imposing its rule perhaps FESEA should know who it is ruling.

For the record it should have stated [perhaps] 'Representatives of a licensee who are included on ASIC's Financial Advisers Register' (Financial Advisers).

One can only assume FASEA are deliberately setting out to destroy financial planning businesses and careers. There is no need for a limit on the number of times someone can sit the exam. Especially when it is a completely new initiative. How can we be sure they won't inadvertently set the bar too high? Plus, the 2 year time-frame has also been dramatically scaled back, because a) you can't sit the exam until you complete the education requirements first; b) they are proposing a 4-6 weeks time-frame before results are released; and c) they are proposing a time-lag between re-sits. Put those three factors together and some poor sods will be forced into a very small window of time to save their careers. One can only imagine the level of stress this will invoke. This is another farce released by an unaccountable organisation, bereft of common sense and compassion for thousands of hard working men and women whose livelihoods are now in jeopardy.

If you cannot pass a simple, non-technical exam in 3 attempts you should not be advising people on their wealth for a living.

We have an important job and should be held to reasonable standards. The exam should be harder than this.

Reality how can you know it's a simple exam when we have just received this bare bones bit of information? on the face of it a 3-4 hour exam for which they won't be releasing guidance as to what type of questions might be asked and with a 65% pass mark doesn't sound all that simple to me. I've done exams through FINSIA before where they've stated that they don't endorse rote learning and that the exam will be applying knowledge in a practical way, then the exam was choc full of questions asking me to regurgitate sections of the Corporations Act word for word. An exam where literally anything in the broad world of financials services can be asked doesn't sound like a breeze to me.

Because like always it will get watered down to cater to the lowest common denominator after the lobbying is done with... Just like grandfathering commissions, pre-opt in was etc. They wont kick the dinosaur's out with the exam.

Some further clarifications and analysis of yesterday's announcement need to be undertaken. TWO things to further consider are:

ISSUE 1: 'RETURNING ADVISER' - what does that ACTUALLY MEAN? Is there a difference between a "Returning Adviser" & an "EXISTING Adviser" as defined under Section 1546A of the CORPORATIONS ACT?

FASEA's ANNOUNCEMENT yesterday mentions "Returning Advisers" as those who "Previously held registration as a Financial Adviser in Australia and are now intending to return to practice after more than 5 years without practicing," Returning Advisers are "eligible to sit the examination" meaning they are not required to meet the 'approved qualification' hurdle.

Does this mean "Returning Adviser" = "Existing Adviser" under Section 1546A of the CORPORATIONS ACT which states an "existing (adviser)":

(i) is a (existing adviser) at any time between 1 January 2016 and 1 January 2019 ; and
(ii) is not banned, disqualified or suspended...

If so, is there a POTENTIAL CONFLICT between the s1546A definition (anyone who was an Authorised Representative in the 3 YEAR period between 2016 to 2018)
yesterday's announcement of anyone who has "Previously held registration as a Financial Adviser in Australia and are now intending to return to practice after more than 5 years without practicing,"

ISSUE 2: New Entrants/Returning Adviser - the mechanics of being Registered. FASEA has proposed that NEW ADVISERS OR 'Returning to the Industry' (those added to the ASIC Financial Advisers Register on or after 1st January 2019) must adhere to the following process (in THIS ORDER):

1. Have COMPLETED an approved qualification and intend to be registered as a ‘provisional relevant provider’ after 1 January 2019


2. Sit & Pass the National Exam with questions designed to test the application of financial adviser knowledge appropriate for candidates at AQF 7 level of reasoning.


3. Commence their Professional Year (as a 'provisional relevant provider'... this is fancy talk for Financial Planner/Adviser). :)

Why couldn't the National Exam be completed as someone was completing 'an approved qualification'? Why must the person wait until after Graduation/completion and only further delay the entry of quality candidates in to the industry? The outcome of being able to concurrently sit the Exam would be the same and may save someone 3 months or more in terms of becoming authorised.

Any thoughts?

Did I miss the fact the exam does not actually test for competence in financial advice, understanding investment risks, pensions, super laws, insurance regulations etc? Seems like the end result will not improve the industry and will not tet the one thing clients actually want - Good financial advice!

Exactly, this achieves nothing. All it does it caters to the product flogging dinosaurs who have no idea about true strategic planning.

What a mickey mouse exam. Where is the technical element? This won't prove anything to anyone. What a waste of time for everyone.

This is what happens when you don't stand up to a death by a thousand cuts over the span of years. The Industry is being deliberately targeted for destruction and those virtue signalling industry encumbants such as "Reality" are your greatest enemy as they continue to validate this obnoxious behaviour by the so-called leaders of the industry. What an absolute farce. How ridiculously broad is the mooted syllabus, how hard is it going to be marked? Is there going to be scaling on a curve or not? Consistency of examiner? Anyone sitting there going "how hard could it be?" is being wifully ignorant of the risks to their OWN career let alone those they consider inferior.

The devil is always in the detail and they will leave as much wiggle room for themselves as possible. That is completely unacceptable.

Now I understand why I left the industry 2 years ago - what a mess. Would you seriously recommend your university qualified sibling become a financial planner not a hope in hell. The business is broken....regulation has killed a service so valued by clients and unfortunately will be the ones suffering when it ceases to exist.

I have a masters degree, cfp, cta, have completed 40 hours pa of pd for the last 10 plus years, completed and passed the recent tasa requirements, and now the government add this additional requirement...will not be voting for this government at the next election.

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