On 14 December, the government released draft legislation to update the adviser exam. This includes removing the short answer questions from the exam and increasing the number of multiple choice questions, while also removing the requirement that only provisional relevant providers and existing advisers can sit the exam.
These amendments concern principles 2 and 5 of the exam, as outlined in the Corporations Determination 2021.
According to the government, exams based on multiple choice questions “create efficiencies” by enabling computer marking to replace manual marking. As a result, the cost of administering exams will be reduced and candidates will receive their results at a quicker rate.
Moreover, the announcement described how the current exam eligibility criteria restricts access to the exam and is causing unnecessary delays for new entrants looking to enter the advice industry.
Speaking to Money Management, Andrew Clucas, provisional financial adviser at Queensland advice practice McGregor Wealth Management, shared his thoughts as a current PY candidate and said he hopes it brings costs down.
“The cost of the adviser exam has increased dramatically since its inception. I was fortunate that my employer was willing to pay for the first attempt on my exam. At $1,500 a pop, it was a strong incentive to study hard and pass first go, which I did, but I know not all new entrants are this fortunate,” he told Money Management.
“The cost of the adviser exam should absolutely go down if there are efficiencies generated by replacing short answer questions with multiple choice questions,” he described.
However, whether these fees will actually decrease in reality is another question altogether – and the provisional adviser isn’t holding his breath.
The government’s impending changes will also enable new entrants to sit the exam while they are still completing their studies to mitigate bottlenecks. However, the decision to push the first 2024 exam back from 15 February to 26 March has caused short-term delays for candidates.
In November, FAAA chief executive, Sarah Abood, spoke about how candidates are finding their PYs are taking longer than expected due to the shortage of available dates to sit the exam.
“The challenge of the exam at the moment that we hear is around the inflexibility of when you can take it. It has to be a particular point in time of the Professional Year, and if you just miss a scheduled date with ASIC, then your Professional Year can end up taking 18 months or even two years,” she said.
Rachel Hubbard, financial planning assistant and PY candidate at IPS Wealth Management, said: “[The delay] has pushed back my ability to progress through my professional year and therefore advance my career, especially if I don’t pass first go. It will be around five months between exam sittings with the next date being pushed back.”
While the government’s amendments aim to help more entrants join the industry at a quicker rate, Hubbard said pushing back the exam date by another month will extend the PYs of many in a similar position to her.
“It may also be frustrating for many businesses, who are waiting for their professional year candidates to become advisers so they can service more clients.”
Clucas added the exam dates also slowed down his progression through the PY as well as the subsequent marking process.
“My professional year was slowed down a bit because I couldn’t start quarter three of the PY until I had passed the exam. The exam was only available during certain months; it had to be booked a long way in advance and it took at least six weeks to mark,” he said.
“I would have liked to have sat the exam earlier while my Graduate Diploma of Financial Planning was still fresh in my mind.”
Hubbard added she definitely would have sat the exam sooner if she could.
“It’s great that new entrants will be able to complete their exam earlier on. Not only can it be completed soon after completing the relevant units of study, if you pass, it doesn’t create a barrier to progressing into quarter three of the PY,” she told Money Management.
The changes could also mean more supervising advisers will offer PY opportunities if they are confident that a new entrant can be trained up in 12 months.
“There is a significant cost in time and money to train up a new entrant to be an adviser. This burden would be reduced if a new entrant can sit (and hopefully pass) the exam at the beginning of their professional year and have a timelier progression to quarter three,” Hubbard added.
Although some candidates may decide to wait until they have additional work experience before taking the exam, Clucas believes giving them the choice will minimise barriers to entering the profession.
He continued: “Overall, changes that reduce costs for new entrants, maintain professionalism, increase flexibility and lower barriers to entry should be encouraged if the chronic shortage of professional advisers in Australia is to be addressed.”
1. The exam should have short answer questions and the argument that speeding up the marking process will encourage people to join the profession is one that simply does not make sense.
2. Five months to sit the exam again is similar to if someone failed a large exam at university but arguing for a smaller window is reasonable.
The crux of the PY issue is that there are not enough large employers with advice/training academies ready to invest in young advisers (the people who the industry wants to encourage to choose financial planning majors). Until that happens, any approach to new entrants (primarily targeting school leavers choosing uni majors) will either be unnoticed or appear disjointed, with little to nothing done to address their incentive structures to choose financial planning as a career.
When was the last time a large company approached a university campus to market their PY/adviser academy?
Even if PY advisers finished closer to the 12 month mark, I do not think that would make much difference to encouraging new entrants. The training needs to be taken much more seriously, better structured and more deliberate. New entrants would need to associate each increment with a clear outcome and be confident that they are making meaningful progress – not just going through the motions for the sake of compliance.
I’m not sure why any PY candidate would want to wait until they have additional work experience. The exam is based on the legal, ethics, and behavioural finance theory taught in their degrees. The exam questions are mostly based on sensationalised, unrepresentative, historical case studies, and have little in common with the real world work experiences PY candidates are likely to encounter. Might as well do the exam ASAP after studying the theory.
Then again why have the exam at all anymore, since all new entrants are already being examined on that theory as part of their (now) compulsory degrees.