Speaking to ifa about draft legislation for the proposed higher adviser standards, Joanna Bird, senior executive leader in ASIC’s financial advisers team, said the regulator wants to see a financial advice sector that delivers accessible, high-quality advice in which consumers and financial investors can have trust and confidence.
“But our surveillances of the financial advice industry have consistently found that many financial advisers are not adequately trained or competent to deliver financial advice to investors. This contributes to poor advice outcomes for consumers,” she said.
Reiterating comments made by ASIC chairman Greg Medcraft, Ms Bird said that it supports proposals to lift professional, ethical and education standards of advisers.
“In fact, ASIC has long advocated for an increase in minimum education standards, including a degree qualification and a professional year for financial advisers. We have also strongly argued for a mandatory examination,” she said.
At the beginning of December, the government released draft legislation for the proposed higher adviser standards, which states prior learning for existing advisers will be measured by the types of courses advisers have completed, not the number of years of experience they have.
According to the draft bill, by 1 July 2019 existing advisers must either have a degree or have completed one or more courses that give the advisers “qualifications equivalent to the standard”.
The courses will be determined by an independent, industry-established body, set to begin operating from 1 July 2016. The body will also develop a code of ethics for advisers, and new CPD requirements.
Further, it will approve the exam that all advisers will need to pass by 2019.
From where I sit this is a half truth..
What it really means is that due to insufficient Supervision and Monitoring by Licensees, advisers do what they like and cut corners. I cant see this changing until ASIC actually call upon licensees to show their Supervision and Monitoring plans and evidence their work. Most bank advisers are highly qualified because the bank pays them to get the qualifications. However there are too many licensees willing to accept all comers for a clip of the ticket. ASIC are under resourced and Licensees are prepared to gamble on not getting caught meeting their basic obligations. I have witnessed this first hand recently and wonder why we continue to act with integrity when many others cant be bothered. ASIC seem powerless to act and when they do it can take up to two years or more to get a result. As an Industry we need to weed out the bad eggs and not all of them are in vertically integrated businesses.
All the education in the world does not make up for Ethics, Integrity and Honesty.
No point having more legislation if it can’t be policed.
I’m with Reality. I agree with this article.
They aren’t pulling these comments out of thin air. They are seeing some disastrous outcomes for consumers.
Our profession (or as they call it, industry) has a lot of improving to do. We don’t improve by being all lovely and nice about it. Few people in the comments below are taking these comments too personally.
This is about the profession. This article isn’t written about you. Think bigger people. Be objective.
If this is such an issue, what are ASIC doing about it under the CURRENT legislation? ASIC seem to be good at finding issues – which is one half of its job – and utterly incapable of fixing them (the other half).
Since they are incapable of enforcing the Best Interests Duty, perhaps it’s time for that particular piece of legislation to be repealed.
Might be nice if someone at ASIC actually worked out that whilst there may be a need for improvement and some incompetent advisers out there (without doubt) that there are also competent and ethical advisers doing great work. Then analyse the difference with facts and provide information on how to differentiate for the consumer. This adviser bashing without showing any positives is not helping anyone and is stopping Australians getting advice from the great advisers we do have.
Ive met some very dumb people with degrees and even doctorates but I 100% support increasing education levels in a nationally and constant framework. I also query the real value of us hanging onto the “life experienced adviser” – I often value their opinions and experience but we need to be sure we don’t have a repeat of issuing CFPs based on years in the industry supported by a certificate out of a cornflakes packet that happened.
I put forward that if we really want to improve the consistency of quality and appropriate advice across all licensees and their attached advisers that ASIC goes beyond just reviewing SOAs ( which if skillfully constructed can hide poor advice e.g. inappropriate platform consolidation ) and review business plans and financials of licensees and advisers. For example skilled analysis of an advisers commission statements and then their accounts will soon highlight biases. Licensees need to be analysed for product or advice biases driven by their financials and/or their product manufacturer owners.
We need to accept that there will always be suspect advisers but the odd adviser here and there can be fixed. The real problem, the real elephant in the room, is at a level twice or three times removed from the adviser. As you know when you do a financial plan, you will only get the real and complete picture if you ask the right people the right questions. And this questions can often be uncomfortable but they are necessary to produce the best solution.
To be fair I completely agree with this article. I know at least 10 advisers that rely on their paraplanner to do 100% of the strategy work and then they just give the SOA to the client and try to sign it up. They don’t understand the most basic of concepts around superannuation and TTRs… Insurance 30 day wait, stepped premiums every time so they can rewrite in future.
If we can weed those people out of the industry we will be in much better stead. Interestingly enough most of them were awarded their CFP status long ago..
As Mark T has rightly stated, if ASIC’s assessement of the competency of advisers is based on the quality of SoA’s they have reviewed, this raises another issue. SoAs, in the main, tend to be cumbersome documents developed by licensees and mandated for use by their ARs. They are often more about avoiding litigation rather than provided clear and concise recommendations to a retail client. Why a simple piece of advice that recommends consolidation of multiple super accounts, and perhaps commencing a TTR pension needs to be contained in a document that runs into 50 – 60 pages, is one of life’s mysteries. It is when we get involved with overly burdesome compliance documents, that the system breaks down and advice becomes convoluted and cumbersome. No wonder client’s are confused. If, on the other hand, ASIC’s assessemnt is based on intereviews with advisers, then that is another issue that requires a different response.
That’s rich coming from the ASIC. Up until approx 2 years ago the ASIC published their list of approved/applicable courses, so if the ASIC has been so concerned for so long, why did they keep listing sub standard courses!
Did the ASIC ever bother to check any of the courses they put on their list, probably not, which is why they might have dumped the list in the end!
But don’t let any of that history stop the continued blaming of the adviser by ASIC or anyone else that wants blame the adviser for any failings in the sector!
Once again this is proof that the ASIC has no understanding of the industry.What constitutes financial advice?.Is Ms Bird referring to a Bank teller?,a life insurance agent?,A authorised representative of a single product provider?a limited license accountant?.If Ms Bird understood the AFSL system currently the Dealer has the ability to authorise a person and then set out what advice he is allowed under that license to carry out under that license.
Ms Bird,we presume is referring to advisers that have authority to give advice on a number of disciplines,or is she?ASIC has it in its head that all persons in the financial services industry needs to have a degree and post grad to give advice.NOT SO.
Once again all ASIC needs to do is to make recommendation to the Government to change the legislation.The change required is to make the Directors of the banks,Superannuation funds,Listed investment companies personally liable for advice given and you will see the industry overnight sort it out.
How do I know this,because this is what happened when these changes where made to the Work Health and safety laws.
If the response is that laws currently exist ,then why have the Directors of some of our major banks not been held to account.
The point of having a ‘Degree’ is that it demonstrates an ongoing ability to learn and think for yourself. In other words, to have the benefits of an Education. Those without such a mind expanding experience will never understand or acknowledge that they lack something that cannot be gained by less than taxing CPD quizzes and other so called accreditations, a lot of which are cheated on anyway. Why should Financial Planners/ Advisers be different to other occupations eg accountants, lawyers, teachers etc?
This process is interesting as there is not once shred of the issue of cost to the consumer place in the cycle.
Hope that ASIC is going to fund the consumer costs on this one, as was the case in the UK when it got really expensive and the tax take dropped the Government in the UK took action
I still don’t understand ASICs fixation on having a DEGREE! Surely a post grad exam(s) would prove the relevant ‘competence’ of advisors, much more than having spent 3 years at Uni. And opens the gateway for advisors with life experiences which is what truly helps them understand, and so be able to advise, their clients.
That’s a bold statement and one that certainly needs clarification. If Joanna is making the comment simply as a result of examination of many SOA’s that have been produced, then it’s a question of poor conveyance of advice, not necessarily the advice process in itself.
However, if she makes the comment based on interviews and examinations of financial planners, then it’s a qualified statement. What exactly does she mean by “our surveillance of the financial planning industry”.
Is it reasonable to say that simply because the construction of the SOA was poor that the adviser isn’t competent or poorly trained?
Once again, we have to be careful to show whether its a systemic issue or a personal issue, i.e. is the adviser actually incompetent or is it the systems they’re using that are exacerbating the issue.