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.
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.
