Speaking on a recent podcast hosted by the Association of Financial Advisers (AFA), Phil Anderson, the chief executive officer of the group, defended the experienced adviser pathway and explained why he doesn’t believe the pathway is necessarily equating 10 years of experience in the industry with a degree.
Mr Anderson stressed the importance of experience while also defending the role of education.
“The actual original legislation did talk about having an undergraduate degree, or higher or equivalent, and the question is what does equivalent actually mean? I think education and experience are not the same thing, I think education is important. Having good education doesn’t mean you’ll be a good adviser, and equally having a lot of experience also doesn’t mean you’ll be a good adviser,” Mr Anderson said.
“But I think 10 years of good experience is very important, it is very valuable. Now I’m talking about there are things that you get from experience that you don’t necessarily get from education, and that’s the people skills that advisers are known for, their great capacity to work with clients, to flash out what really motivates them, what really concerns them, what their needs are. That’s not stuff that you necessarily learn at university.”
Last month, the government opened its consultation on the experience pathway, a proposal that seeks to recognise experienced financial advisers who pass the exam, have 10 years of experience, and a clean practice record.
Based on the consultation documents provided, the pathway would require advisers to make a self-declaration confirming that they have met all the criteria to be an experienced provider.
Dissecting the pathway on the podcast, Mr Anderson said he has concerns about its real-world implementation.
Specifically, while he believes that monitoring an adviser’s honesty regarding their clean track record would be feasible due to the Australian Securities and Investments Commission’s (ASIC) strong oversight, he did raise concerns about the self-assessment of a 10-year experience period.
“Now I’m not particularly worried about it so much for people who have been authorised representatives for that entire time because there is an authorised rep register that goes back to the start of the FSRA days in 2003, or thereabouts, the Financial Adviser Register only started in March 2015 so who is being left out of an official register is people who were representatives, that’s people who are salaried advisers, they were employees or directors of an advice business,” Mr Anderson explained.
“There is no register of those people, so we’re going to have complications about people who spent time as a salaried adviser,” he noted.
Mr Anderson also flagged potential complications for those advisers who have worked part-time.
“The assessment of whether someone meets that 10-year, full-time equivalent requirement is going to need to be done very carefully,” he added.
Mr Anderson acknowledged that there is a risk of misrepresentation, but he expressed optimism that adequate controls would be put in place to ensure compliance. He also suggested advisers have an obligation, according to the Code of Ethics, to ensure their colleagues are “doing the right thing”.
Ultimately, the AFA CEO believes between 2 to 3 thousand advisers would benefit from the pathway.
“The FAAA is about to kick off a member survey and in that, we’ll be able to obtain some really useful data to put some more numbers around how much this would involve. But I think it is a really important development because it will help to hold onto many of the really experienced, quality advisers that we want to stay in the advice profession,” Mr Anderson said.
He also shared that previous surveys of its member base revealed a clear division between those that supported the pathway and those that didn’t.
“We found that half of our members are strong supporters, and half of our members are strongly opposed. What we’ve sought to do is find a position that we think takes in the arguments of both sides,” Mr Anderson said.
Previously, the AFA argued that the experience pathway should only apply to those older advisers with experience and maturity, and not younger advisers who just meet the criteria. To ensure this, the group suggested a 10-year sunset clause.
In fact, the Joint Associations Working Group, of which AFA is a member, demanded in September last year that the experience pathway include a sunset clause that ends on 1 January 2032.
“Any adviser who wishes to continue to practice post this date would need to meet the education requirements for existing advisers,” the group said in a submission at the time.
“To help address the shortage of advisers, we need to help more students choose financial advice as a career, make a career change to become financial advisers a viable option through improved flexibility in education pathways, and make it easier for highly competent individuals to continue in their chosen profession.”
Groups now have until 3 May to provide their views on the government’s draft legislation.
For me, either you have the education qualifications that suffices or you don’t. A better option would be to widen the degree acceptance. But when you are handling a person’s lifetime wealth savings, an uneducated person irrespective of how much experience they had could still be doing the wrong thing. Perhaps risk only advisers can benefit from the experience pathways but none else.
We are back to the slippery slope of ‘ almost there but not quite’.
When it was first instituted, it was quite clear that the education requirements were going to cull advisers – but few cared then (everyone seemed too busy with Trowbridge). The regulators and the AFA/FPA didn’t have the wisdom to foresee this….which speaks to their competence?
The ‘profession’ is back to being ‘half baked’.
As least with doctors, lawyers and accountants they have to have their education in place before registration so we are safe there. I guess advisers will be the 2nd tier profession now 🙁