According to the bill’s explanatory memorandum, several of the proposed reforms will increase average annual regulatory costs for businesses by $77.3 million while individuals, including new and existing advisers, will bear an extra $87.8 million a year.
There will be no additional costs to community organisations. The memorandum states that all new costs will be offset from within the Treasury portfolio, however it does not provide details.
For licensees, most of the additional costs will be associated with developing policies and procedures to ensure their advisers are complying with the new professional standards and ethical codes.
“This will include updating their IT systems to track adviser education and ongoing professional development and ethical training,” the memorandum states.
Meanwhile, new financial advisers will incur costs associated with gaining a three- or four-year bachelor degree, which may “impose significant costs from both the course fees and the hours of study accumulated”.
Existing advisers will be responsible for the costs associated with updating their educational and ethical qualifications.
Speaking to ifa, FPA chief executive Mark Rantall said that estimated cost will likely increase once the independent standards-setting body, which is expected to be funded by the industry, is operational and if a degree requirement is placed on all existing advisers.
“There is little provided around those estimates. One would assume that they would include the cost of education and also the cost of running and establishing the independent counsel,” he said.
“We haven’t seen the breakup of that costing but if in fact existing advisers are required to obtain degree qualifications, then those estimates could well be exceeded. This is something that advisers should be aware of.
“As we put in our submission, we’re not supportive of the need for existing financial planners to obtain degree qualifications. We think this is legislative overreach and isn’t in the spirit of what’s being negotiated.”
A question that comes to mind is: Is it really the fact that advisers do not have a degree that has led some to behave badly or is there another underlying reason that is at the root of it all?
The industry, primarily intos, licensees and industry bodies, has no one to blame other than themselves for where it is today and the costs will have to be absorbed or passed on to clients. To be honest history shows us that the additional cost will be be substantially carried by the adviser and the client not the instos and licensees. Yet again the poor adviser, mostly very unfairly, will have to bear the costs of their masters.
One of my concerns is that the FPA is again big on rhetoric and trying to isolate existing advisers from change without a substantial solution how to address the existing adviser education position. It’s very easy to say that they don’t support existing advisers having to get a degree qualification but what is their proposal other than more of the same ( get a DFP and do on-going education ) to bring a consistent government and public education and qualification level to ALL advisers. Whilst the CFP designation means a lot to us its too much an industry designed standard to really mean anything much to anyone outside. There are CFP designations out there that are almost “honoury” so we need something like degree qualifications to give it the credibility it currently lacks.