From next year what changes to education and professional standards can advisers expect?
From next year we are going to get confirmation of how the framework – that is the future framework of the Education and Standards Framework for the financial planning sector – will take shape.
Next year will also see the establishment of the new independent body that will oversee the framework, which will include the curriculum for the new degree requirements for new financial planners and will also include the transitional pathway and bridging courses for existing advisers. It will also develop other requirements such as continuing professional development, which will be the minimum standard for everybody and will look at the criteria around a code of ethics – because there will be a requirement for all advisers to adhere to a code of ethics and also develop the criteria for the professional year for new financial planners.
So, next year is really the start of the framework and the actual detail that has got to be worked out in respect to all those components.
Technically no one has to do anything differently from next year.
Will there be a requirement for advisers to belong to a professional association?
Technically no – the announcement by the minister on the Financial System Inquiry a few weeks ago outlined the framework which didn’t include mandatory membership of a professional body. But what it did include was that advisers, or anybody providing personal advice, would have to be subject to a code of ethics. That code of ethics will be obtained via a professional membership of a professional body and part of the discussion from next year will be how else do advisers get subject to a code of ethics if they chose not to be a part of a professional body. Alternative options will need to be canvassed, but effectively most financial planners will meet that requirement through their membership of a professional body.
There are a lot of advisers that have their own niche and specialise in a particular area of advice. Is there any discussion around whether there will be specific education requirements for someone who provides specialist advice, such as risk?
I think it is important to look at this in a holistic way – but at this point in time the answer is, not necessarily.
The new framework itself is meant to apply unilaterally across the whole financial advice sector. So any individual who is authorised or licensed to provide personal advice to retail clients will be captured by it.
I think the question you raise is important, and that will no doubt be a subject of detail and criteria that the new independent body will have to work out. But what is really important is that there is an opportunity to really look at the advice profession almost with a clean sheet of paper. What the FPA is encouraging is that you need to consider what minimum base requirements are for anyone who provides personal advice. If you think about the medical profession, everybody has to do a base medical degree and then you have doctors that will go and specialise in certain fields. So I think we need to look at the advice profession in a similar way. There are obviously core elements in financial planning that everybody should have a basic understanding of, and that’s your ticket to practice, and then if you want to specialise in a certain area then you need to consider further training to specialise in those areas.
That would be for new people coming into the industry, not for people that are currently established.
Will the current minimum education requirement, the RG146, continue to be the minimum requirement until these higher standards come in? Or will there be requirements that a licensee will have to enforce to make sure advisers are meeting higher standards?
Technically the RG146 will remain in play until the new standard is legislated. So licensees will only have RG146 as the criteria that they need their representatives to meet. But smart licensees of course will be trying to future-proof their advisers and can start looking at implementing and imposing higher standards for those advisers that join their business. So it is a choice that they need to make. They may want to wait until there is a little bit more certainty next year, but technically RG146 is the minimum level that exists until such a time that legislation supersedes it.
What challenges lie in the realms of education and higher professional standards and what opportunities lay there as well?
Without a doubt I think a really important message that gets out there is that this new framework is going to be a challenge. For existing financial planners – it is obviously easy for the FPA to say that this is the right thing to do, but we do understand that it will be a challenge, because for certain individuals it is going to require them to do something extra and until there is complete certainty around what that is, we appreciate that the uncertainty creates some challenges.
What this is all really about is everybody that is in the industry today will undoubtedly say they are very keen to remove the issues that have brought this industry down. Also, they not only want to build trust and confidence with the Australian people, but they also want professional recognition from other professions and colleagues in other industries. If you think about what these higher education and professional standards will do, it will actually create the framework that will, in my view, not only be equal to, but in some cases greater than, the requirements of other professions and that means advisers will be at a very, very high standard and this will help build trust and confidence.
So, if you want to practice as a professional financial planner in the future, they are going to have to pass significant hurdles which will mean we are going to get the brightest kids of the future, we are going to get people who are wanting to be in this profession, and that is what this is all about.
