On 24 June the Australian Securities and Investments Commission released Consultation Paper 212, Licensing: Training of financial product advisers – Update to RG 146 (CP 212), which looks to install a bachelor’s degree equivalent as the minimum level of study for new advisers from 2019.
However CP 212 ties the new standards into the previously released CP 153 consultation, which proposes implementing a national annual exam for all advisers based on the upgraded RG 146 requirements.
Worryingly, according to Dr Mark Brimble, associate professor (Finance) at Griffith University, if that national exam is implemented there will be no requirement to do a specific training course related to RG146.
Based on the latest proposed measures, “the national exam would supersede any particular education requirements, and it would be up to the individual applicant sitting the exam to educate themselves through a training course or their own private study,” Dr Brimble told ifa.
Discussions so far have suggested that exam would take the form of a three hour online multiple choice exam.
“You could pass a three hour exam with no particular formal study… and if you pass it you’re away,” Dr Brimble said, which he described as “rather alarming”.
“I wouldn’t even know where to begin in terms of the concern that would raise relative to what [financial planning educators are] trying to achieve and what this [CP 212] document is trying to achieve in terms of education requirements, knowledge requirements and skills requirements,” he said.
Dr Brimble questioned how the skills component of the proposal would be assessed under a CP 153 national exam if there is no requirement to complete course of study built into those skills requirements.
While acknowledging the new document is still in consultation form he said the exam exemption appeared to undermine the whole document.
The industry has long suffered from criticism that the under-regulated RG 146 regime allows a practitioner to become a qualified financial planner in as little as a few weeks of study (with registered training organisations free to assess their own graduates), leading to uncertainty over the actual capability of those with the minimum level of study.
The great shame is that it has all been made so stupidly complicated in the first place
Sam, I disagree with your sentiments. Education is an important component of professional advice. There may be some instances of predatory investors but I believe (in my experience) most investors want a return that will help them achieve their objectives. Advisers that sell up the potential for high returns, and gloss over the risks set investors up. If we promise the unachievable is it wrong for investors to be suckered into the dream?
With reference to investors acting like a herd. I am pretty sure that most retail investors have absolutely no idea how to invest into Bonds, so the only way they are putting money there is through adviser networks. So if investors are flocking to bonds right now it is because that is what they have been advised to do. Perhaps the current advisers need more education?
Well, what a surprise! another academic who wants to own this space. Our industry needs academically qualified people but it also needs skilled advisers from a range of backgrounds and experiences. People who will challenge the orthodoxy and bring a range of perspectives to their clients. I have worked with some fine planners who have come from professions such as nursing, teaching and business. The new academic training requirements will end up creating a silo of compliant but narrowly focussed advisers who may be easily directed but add little to their clients. How many mature age entrants to our industry will we attract by raising the bar, and to what end? Our profession differs somewhat from many as our core skill is to inspire our clients into action. Agents of change – not just purveyors of knowledge.
ASIC, under a Labor, has a vision of our industry that is not universally shared, roll on the election.
Couldnt agree more with comments 1 to 3. All the FPA & Asic have managed to achieve over the years with FOS, RG146, Fofa & every other BS course & education requirement regime is BOX TICK & raise revenue for THE FPA’s Education mafia scam. They have successfully given Investors an money back guarantee. A “try” for as long as you like after you buy & not only will you get your “money back” if it sours but the compliance NONSENSE is so easily proven the adviser did something wrong in almost every case that you you the investor will also get opportunity cost awarded also. Its the perfect scenario for two sectors, investors & lawyers. Both will have a bonanza over the next decade. You the adviser will get a knock on the door one day in your retirement advising you of litigation because your SOA, file notes, best interest duties, safe harbour rubbish etc etc etc was not 100% & your PI insurer has bolted or gone under so its your house, savings or both that the lawyer wants now. Thanks FPA!
Its worse than that, we now live in a society that has privatised profits (the investor keeps them) and socialised losses (the investor shares them by claiming them back from the adviser and his licensee through a government sponsored program called FOS). Will the government pass legislation that an adviser who stays RG 146 compliance be immune from being sued by his client for investment losses because the adviser is educated. I think not? So why all the extra education? How can adviser be blamed for what goes on the other side of the world having an impact on an investment performance today? But if a claim goes to FOS it does not matter how much Education an adviser has it DOES NOT mitigate litigation because lawyers have no right of appeal and PI wont pay (see last weeks article on Chambers Investment Planners). The problem is investors are fundamentally Greedy and don’t want to take responsibility for their situation and you cant legislate against greed
Sam, agreed and agreed.
Education and process can help mitigate any potential litigation an ‘investor’ may decide to take if used and followed properly. What ever happened to the principles of Caveat Emptor? Predatory investors are here and will use you to hedage their poor investment decisions.
A three hour online exam? THREE HOURS!!! This should be reported to the RSPCA. I can feel a stress related illness coming on. TPD cover, own occupation…yesssss I have it.
All these extra exam requirements are not going to change the fundamental problem with investors behaviour and that is investors are GREEDY. They want to make money! They don’t really care how they just want to make it. Investors follow the herd, at the moment its Bonds, Next will be property and then in a few years it will be shares again. Investors hate losing money, they want someone to blame, they don’t care how educated you are , they don’t care about SOA, ROA, FDS, FOFA. They want compensation. How educated you are has nothing to do with it. Whist changes to RG 146 may make advisers smarter it won’t change investor behaviour. ANd that the real problem. Everyone knows it, they just don’t know what to do about it.