In the Productivity Commission’s interim Building a skilled and adaptable workforce report, the research and advisory body noted that its consultation on occupational entry requirements (OERs) had pointed to financial advisers facing excessive obligations.
It had found that these requirements are “disproportionate to the level of risk, contributing to a decline in the number of financial advisers, which has limited the public’s access to affordable advice”.
The Productivity Commission also noted that the imposition of the more stringent standards following the royal commission, while aiming to “improve consumer outcomes and restore confidence in the profession”, had reduced the pool of potential entrants.
“From 2019 to 2025, the number of advisers fell from 28,000 to fewer than 16,000 which has reduced the public’s access to affordable financial advice,” it said.
“In response, the Australian government is reforming entry pathways to ensure Australians have access to high quality, accessible and affordable financial advice.
“Proposed changes to the education standard include removing the requirement to hold an approved qualification focused on financial advice. This will be replaced with a requirement to hold a bachelor degree or higher in any discipline, complete minimum relevant study in areas such as finance, economics or accounting, and complete prescribed accredited financial advice subjects such as in ethics, law and regulatory obligations and the financial advice process.”
With the study time expected to halve for most commerce, economics or finance students on the back of these proposed changes, the Productivity Commission said the “remaining professional standards will continue to support the overall development of financial advisers”.
“OERs should exist only where there is a clear and demonstrable risk to consumers or workers that cannot be addressed through less restrictive and costly means,” the report said.
CPA Australia has welcomed the acknowledgement, with chief executive Chris Freeland stating that the draft recommendations could be an encouraging first step to achieve reforms for financial advisers.
“We’re pleased that the Productivity Commission has acknowledged our calls for an overhaul of the entry requirements for financial advisers, which is ultimately having a detrimental effect on the public’s ability to seek professional financial advice at a time when they need it most, such as nearing retirement,” said Freeland.
“The cumulative effect of the regulatory burden imposed on the profession in recent years has demoralised advisers to the point where many are now walking away from businesses they grew from the ground up, while fewer new professionals are entering it to fill the gap because of the current entry requirements.
“Government needs to work constructively with the profession to understand these issues and begin to address them before the number of financial advisers reaches a critical level. The Productivity Commission acknowledging that entry requirements are disproportionate to the level of risk is a positive step in the right direction.”
This may be controversial so bear with me (and also this is coming from a place of resentment a little bit, I missed the 10 year experience by a cut off and my undergraduate degrees were “non-relevant” for transparency. But here are my thoughts as convoluted and contradictory as they may be…
1. Improved education standards is probably a good thing. The standard of education is the issue. Find a “semi experienced” advisor that has learnt anything from their grad dip and I’ll buy you dinner from the finest 5 star restaurant in your city provided it’s called McDonalds….
2. The professional year is a great thing. Almost every advisor I know, myself included, has learnt more on the job than from formal education. I think it should be longer and with specialist modules/competencies.
3. Again advice should have specialist competencies. Look at the medical model for an example. Strategic advisors are the GP’s – insurance specialists, investment etc are the medical specialists. Or look at lawyers, accountants even damn real estate agents that do commercial vs resi.
4. Personally, I found the grad dip less difficult than my old DFP and ADFP… also so much content was irrelevant. Education should be updated to be more relevant to the field and older/great advisors should be a apart of the process of re-assessing standards.
5. The base line educational standards to provide advice should be high with a real emphasis on “on the job learning”. I know amazing advisors with next to no qualifications and advisors I wouldn’t send an enemy too with a stacked resume (although I’m sure they are competent). Book learning is useful (but you can always find an answer) but for me, you can’t beat on the job learning and experience… who else remembers the first time they had to tell a client xyz investment has lost money or some other bad news.
6. Regulatory standards, consumer protections and compliance mandates etc. should be based from a perspective of “what do you want advice to cost?”. I.e if the target is $1,100 the documentation/protections etc should be minimal, if it is $15,000 than a 200 page document with 8,000 warnings and comparisons is reasonable. If you what the world in terms of documents/protections etc, expect the world in terms of cost.
7. If we want advice to be a specialist field, training should be specialists with a clear “graduate/apprentice” pathway. I wouldn’t expect my heart surgeon to do surgery on my knee and vice versa. The old “jack of all trades” feels appropriate here…
8. As advisors, we need to stop fighting amongst ourselves over silly things like fee models etc, and focus on the big picture of looking after clients.
9. Please, please, please let’s all remember how damn fun, rewarding and enjoyable this profession is. We get paid to have meaningful conversations with people, solve problems, bring joy and be the rock that clients need during some of their darkest hours. How good is the feeling when a client is overwhelmed when you get to tell them “you can retire early/ your payout is approved / you can definitely afford that dream Europe trip/ whatever”?? Feels amazing…
10. I swear half the issues over the last decade or more are from vertical models. Make it simple, if you issue any form of product, you have to exclude your own products from your APL.
Well that’s my useless 2 cents, or rather 10 points…
“Unintended consequence” – such a convenient phrase that absolves everyone of responsibility for the disaster they created.
Shame on all those who participated in the heavy-handed persecution of financial advisers, and double shame on the professional associations that collected membership fees while failing to defend their members when it mattered most.
A specialized degree requirement should never have been the gatekeeper to this profession. Anyone with a commerce, business, finance or economics degree could have easily completed additional graduate diploma units to meet professional standards. The sector would have thrived with this sensible approach.
But that wasn’t good enough for the virtue-signalling ethicists at FASEA (now conveniently defunct). It seems whenever authoritarianism is wrapped in the banner of “protecting the vulnerable,” nobody has the courage to mount a principled defense against regulatory overreach.
Credit where it’s due – it’s refreshing to see CPA Australia finally making the right arguments about the dysfunctional professional year structure and these excessive entry requirements.
But where is the Financial Advice Association of Australia (FAAA) in all this? Their silence is deafening when their members need advocacy the most.
The profession didn’t need perfection – it needed practical, proportionate reform. Instead, we got regulatory zealotry that has decimated adviser numbers and left everyday Australians unable to access the financial guidance they desperately need.
Under current rules it is possible for people with a prior degree in any discipline to meet the education requirements, by completion of an 8 unit Grad Dip in Financial Planning. If their prior degree included overlapping content such as tax or investments or consumer behaviour, they can potentially get exemptions for up to 4 of the Grad Dip subjects.
Before FASEA, new entrants with a degree still needed to do a 4 subject Diploma (Cert IV) in Financial Planning as a regulatory minimum, although most employers required the 8 subject Advanced Diploma. Those qualifications are no longer required by new entrants, having been effectively replaced by the higher standard part or full Grad Dip.
The only substantive change in education entry requirements from the pre FASEA rules is the requirement for a full degree in any discipline. This has been a reasonable societal expectation for new entrants in any professional field since about the 1970s.
Entry requirements are NOT the issue. Regulatory burden for those working in the profession is the issue. There are plenty of people who meet the entry requirements, but choose not to work in the profession due to the regulatory burden.
If entry requirements are lowered, or naive new entrants are duped into joining, that won’t solve the problem. Most of them will leave and go back to their previous roles once they experience how bad it is.
The ones who remain are those who are too far in, and don’t have a viable exit option.
What about the stifling red tape, lack of being able to use professional judgement, backwards licensing, which is costly and the enormous Leveys and taxes to pay for managed fund providers that steal people’s money?? Remove that we’d be a hell of a lot more productive
Probably should have made this press release prior to Shield Master Trust hitting the media. Alternatively this shows that all the changes in the past 15 years have achieved nothing other than mental health issues and people leaving financial planning as an occupation.
What about addressing the 40 hours of CPD each year that advisers have to complete, which is far in excess of accountants, lawyers etc. It is good that the massive overreach for new entrants has been acknowledged, what about giving existing advisers some relief so they can service more clients.
Thank Kaplan for lobbying for this.
Yep the Pollies & Bureaucrats in Canberra are mostly Lawyers, give lawyers all of 10hrs pa CPD and that must include only 1hr pa compulsory ethics.
Do Canberra bureaucrats even have to do CPD ?
Financial Advisers given 40 hrs pa CPD and 9 hrs pa compulsory ethics.
Why do Advisers have to waste 4 times our valuable time pa compared to Lawyers ?
Why do Advisers have to wastes 9 times our valuable time pa on Ethics ?
Any finding of the productivity commission should be that the regulatory environment ensures little if any productivity in the industry!
Sack ineffective ASIC, let Choice stick to vacuum cleaners, Expose ASFA and the Super Lobby groups for their bias and self serving agenda then make Managed Investment Schemes pay for their own mistakes. Like EVERY OTHER COUNRTY IN THE WORLD. Would help productivity….