Financial adviser exam should be scrapped: TAA

According to TAA chief executive Neil Macdonald, the government should consider removing the obligation for advisers to sit the exam to help streamline financial adviser education standards, adding that the exam is fast approaching its use-by date.

“The real purpose of the exam, which financial advisers first sat in 2019, was to establish a level of professional competence in the overall population of Australian financial advisers at the time, many of whom did not hold the new FASEA-recognised tertiary qualifications,” Mr Macdonald said.

He said that many advisers who remained in the industry sat and passed the exam by either the January 2022 deadline or the October 2022 extension, adding that most also undertook tertiary education to ensure they meet the requirement to hold a relevant tertiary qualification by the 1 January 2026 deadline.

“Obviously, those who meet the experienced adviser definition are not required to hold a relevant tertiary qualification, but we have found that some of them have committed to further tertiary education anyway,” Mr Macdonald said.

With anyone intending to join the profession now being required to complete tertiary qualifications at AQF7 level or above, Mr Macdonald said their knowledge is already thoroughly tested along the way.

“Hence the exam should become redundant,” he added.

“In essence, there will be no advisers whose competency needs further testing. The exam therefore becomes an unnecessary additional expense for those wanting to enter the profession, who have already heavily invested in their education.”

The TAA added that despite moving from an in-person to a wholly online exam, the cost of sitting has increased from $540 plus GST in 2020 to $1,500 per sitting.

“In addition to the financial cost, the requirement to do the exam and the timing of available exams makes it harder for people to do their Professional Year,” Mr Macdonald said.

“These requirements are creating further barriers to entry at a time when the profession desperately needs new entrants and consumers want access to affordable, personal quality advice.”

In its 2022–23 annual report, the Australian Securities and Investments Commission (ASIC) revealed the statistics surrounding the four cycles of the examination it “successfully administered” from 1 July 2022 to 30 June 2023.

“ASIC continues to support the professional standards reforms introduced in 2017 to encourage higher standards of behaviour and professionalism for financial advisers,” ASIC said.

“The examination is a key component of the education and training standards that all financial advisers must complete to provide personal advice on relevant financial products to retail clients.”

According to ASIC, 1,297 candidates sat the examination between 1 July 2022 and 30 June 2023. The pass rate was 52 per cent in the July–August 2022 examination, 57 per cent in the November 2022 examination, 67 per cent in the February 2023 examination, and 63 per cent in the May 2023 examination.

More than 20,500 candidates have sat the examination since it was first administered in June 2019, and of those, approximately 92 per cent have passed.