Speaking to ifa, Mr De Gori said while Australia is implementing the bulk of its legislation in a different way from the UK, the industry here could learn from the UK’s drop in adviser numbers in the aftermath of the country’s reforms.
From 1 January 2013, the minimum qualification requirement for UK advisers was raised to QCF level 4 – the equivalent of completing one year of a university degree – a rise from the long-standing level 3 standard.
The change was part of the Retail Distribution Review (RDR) reforms, which also included the removal of commission-bias and other items.
“So, imagine if FOFA and the education standards were happening at the same time – that would have a massive impact,” Mr De Gori said.
“It is hard to compare [with Australia] because we’ve had an opportunity for advisers and advice businesses to implement the FOFA reforms and now we’ll be dealing with the education reforms, whereas in the UK they did it all at once.
“But in saying that, we can learn from the UK in terms of what happened with the adviser losses and make sure it does not happen here,” he said.
According to a June 2013 report by City University London’s Cass Business School, adviser numbers had fallen from 40,000 at the end of 2011 to 31,000 by the start of 2013.
“Advisers point to RDR’s raising of minimum education levels to QCF4 as a major reason for the timing of the recent reduction in adviser numbers,” stated the report, titled The Impact of the RDR on the UK’s Market for Financial Advice.
The reduction in numbers remains an issue for the UK industry, which now comprises 22,500 advisers (as of December 2015), according to financial services organisation True Potential.
Mr De Gori said that in order for Australia to avoid experiencing similar consequences, the government must allow the independent standards-setting body to consider the training and experience of advisers in the transition process.
“If the transition process is appropriate, then I think that’s going to minimise the adviser losses. The government needs to listen to and consider transitions that are actually appropriate and workable for the existing adviser network,” he said.
“And if you do that properly, we’re in a position where it’s a win-win. Winning in that we get advisers who are more qualified and competent, and therefore providing better services to consumers, and winning in that we don’t have an adviser shortfall.”
A funny thing happen on the road from Canberra….. Everyone is talking about a relevant degree but missed the point that the only appropriate degree is one in financial planning. Suggesting a finance, accounting, economics degrees are relevant is like saying a person with a human biology degree can practice medicine. Suggesting financial advisers to do non-financial planning degrees is a waste of resources.
Fortunate for us, many universities offer financial planning degrees and provide credit (advance standing) for those who have completed an advanced diploma in financial planning, etc. They also consider experience and industry professional awards.
I think many financial advisers may actually enjoy doing a financial planning degree, if only they are given a reasonable time to complete the course.
Cheers
[quote name=”Another Scott”]. (a Masters of Commerce is apparently not sufficient)
[/quote]
How can a Masters of Commerce not be considered sufficient? This is where we discover how many brain dead fools run dealer groups.
I think the item which is missing from the majority of the comments to date is that the government and general public truly does not care that there will be a reduction in adviser numbers.
The industry (I do not believe it is a profession at present) is on the nose with the public and it is hard to argue you are qualified if you can get the qualifications to set yourself up in business as a financial planner in less than 2 weeks, which is why some form of minimum qualifications are required. I personally feel that the proposed qualifications without grandfathering are required to re-establish trust. Grandfathering simply waters down the proposals which will lead to trust remaining low and whilst I feel for those that are older they have a choice of leaving the industry or getting the required qualifications.
As someone who meets the current government education qualifications (I think) but has to obtain more due to my licensee’s requirements (a Masters of Commerce is apparently not sufficient) I will need to complete the additional training or change licensee’s, which is something I can not afford to do so it is back to study with the additional costs associated with this.
The interesting part will be whether the reduced number of advisers can make a sufficient return on capital and time to make financial planning a profession which people will want to enter in the future and my expectation is that the answer is no.
This will leave the majority of people unadvised with the smaller number of advisers which remain focusing on the top end of the market.
For all that need to Know I have an MBA so education is not my issue, we have been made pick up all the costs associated with operating after the Insurance companies made us all join dealer groups and accept $40k annually for dealer fees and education ongoing, hence the high upfront commissions to offset those costs, it seems everyone here has forgotten operating costs, now we have a Two year responsibility which does not worry me, but what annoys me is that the Insurers are all ramping up there premiums as we speak by up to 20% and they will be paying us less with the option of taking 60% commission back if the policy falls over.
HELLO
Just do it
I think NIKE would be very disappointed that a person of your caliber was mimicking there catch phrase
Donald Brown – your response to Scott wholly proves exactly what he has said. You tout your overseas conferences and top 5% performance like a true ‘risky’ salesman. This is what the industry is trying to move away from to become a profession with appropriate qualifications.
Today I had lunch with a few other advisers, and in particular with a couple of gentleman who are quite a bit older than me with as many years experience as you profess. Adviser A took great delight in telling me how he’d just finished his Masters, while Adviser B spent the entire time whinging about the changes. And I thought to myself that if I was looking for an adviser, I’d pick the first guy everytime. Upbeat attitude, educated, experienced – everything which Adviser B could be if he’d ‘just do it’.
Wow! This is like reading all the UK blogs and posts from 2010/11, a real flashback! We had plenty of doom predictions for financial advisers and many saying it was the end, also lots of advisers publicly rowing on social media unfortunately. It all turned out very well for every adviser here who embraced the changes and although a slow process we are seen as more professional all the time. We have a way to go though! Those of us who went on to level 6, Chartered Financial Planner and level 7, Fellowship have done very well, but need to also be mindful that exams aren’t everyone’s things! Not everyone is a nerd like me! Those that aren’t are bound to be emotive and protective of their livelihoods. One thing we learned over here is that public forums full of personal comments were very easily picked up on by the press and used against us. So my biggest tip is don’t wash your dirty laundry in public. Anyone seriously interested should look at the work of our largest professional body here ( Personal Finance Society) or can find me online no doubt to ask! Our next phase – on you could pre-empt is to be filling the gap by recruiting young apprentices via a paraplanning qualification and then hopefully move on to advising later ( 3-4 years). Apologies, written on my iPhone with no spell check or formatting ability!
Donald, we are trying to get away from about 25 years of your 29 years of experience as they have lead to where we are today. You also had plenty of time to get degree qualified.
Your latest comment is also basically just talking about your sales ability. You’ve proven his point.
Also, I’ve been an adviser way before FOFA came in but I just want to see the industry appreciated like it should be and this is the first step.
[quote name=”Donald Brown”]FOR SCOTT
I am in my 50s and have been in this industry for almost 29 years so firstly I am no relic but what I am is one of the hardest working advisers that you would never be, I have been on 35 overseas conventions and always been in the top 5% of any of the companies I was associated with “
Don, I don’t think there is any need to be so vitriolic to Scott. I’ve had roughly the same amount of time in the industry as you so our experience level will similar. I’ve also been to countless conferences but attendance, as you know, at a conference doesn’t necessarily equate to standards the industry is striving for. Most conferences are either based on an advisers sales or simply enrolling.
If you aren’t one of the grandfathers or an adviser who needs another grandfathering group I’m sure you will still agree that, even if it will be difficult for some, we need to elevate the perception the industry. In many many cases advisers have been paid or earned far far more than professionals with similar qualifications in other industries. As a result many have been lucky.
Its time for us all to take the hard steps.
It’s time the industry transitioned to a profession that is seen by the greater community as a profession. Fact, whether or not some don’t like it.
We can go round and round in circles about some tough changes that need to be made to get to a universally acknowledged professional level but like it our not education, and standard consistent qualifications across ALL advisers are part of that. And that means no more muddying the waters and community perceptions by adding yet more “grandfathers”.
Length of tenure in our industry, or any professional industry, should not be an excuse or substitute for being in the industry, any professional industry.
A lot of the problems we are in are the outcome of historical poor protocols and supervision by licensees. Its also been caused by greedy product design and commissions structures by the manufacturers. And of course the poor adviser is wearing the brunt of this. But we are where we are.
I’m sure that some of the advisers most vocally protesting the changes were planning to retire within the next few years and I don’t think it fair that as a result of their timing that those who are the future of the industry should be held back in evolving their chosen profession. All that is going to happen is that some advisers will retire a couple of years early.
Let’s just put the same amount of energy in arguing about the changes into getting the qualifications and move on.
FOR SCOTT
Talking about senior advisers with the disrespect you use in your few paragraphs of I don’t think I could even call it content as it sounds like there isn’t much there, I am in my 50s and have been in this industry for almost 29 years so firstly I am no relic but what I am is one of the hardest working advisers that you would never be, I have been on 35 overseas conventions and always been in the top 5% of any of the companies I was associated with prior to dealer groups and have always been a risk specialist, it is us guys who have made this industry what it is and we are not the ones that have caused all this public mistrust by stealing peoples moneys through different margin lending or investment schemes and working for salaried positions because you could not survive without that guarantee.
We are the real advisers that are not on retainers and we are unemployed after every sale and it is that attitude that has made us the great people we are, I worry for the public of Australia if we are leaving this industry to rude people
While higher education standards may lead to fewer advisers, in theory it shouldn’t reduce the MARKET for financial advice. If anything it should increase the market due to greater consumer confidence in adviser qualifications. But in practice the situation is used by commercial competitors such as direct product providers and the DIY investment media, to spread negativity and misinformation and scare people away from getting advice. That’s why the market reduces in size.
Directly quoted from page 6 of an independent research report by Europe Economics titled Retail Distribution Review: Post implementation
“The initial signs are that advisory firms appear slightly better placed to meet their long-term commitments. Though there was some exit from the advisory market, particularly in the period leading up to the RDR, by the banks and by some financial advisers, numbers of advisers and advisory firms now appear stable. There remains a large number of advisory firms and advisers to serve consumers. Among advisory firms, average revenues have been increasing over the past few years. Profitability and capital and reserve levels of firms in the retail investment market has also increased, and the percentage of firms posting a loss has decreased, for the majority of firms. Profitability among larger firms is however weaker, although this situation pre-existed the RDR. The evidence for these findings is presented in Chapter 7.”
Ultimately the ones that will leave the industry will be the stale relics, with business models and attitudes that cant adapt to change.
The initial purge removes the old guard and gives the industry big step towards the desired professionalism.
Adviser numbers are a matter of supply and demand, as seen in the UK an initial shortage of advisers is met with a return to equilibrium over a period of year.
It can only be a good thing.
Once again the industry experts both Government and Corporate believe they will solve all of the issues relating to a few bad apples with increased education, sadly this will not solve the problem. We have seen many people from varied occupations with Tertiary educations commit white collar crime, whether it be Accounting, Legal Financial planning etc it does not solve the problem. Increased compliance within dealer groups will help but at the end of the day if someone actually plans to do the wrong, un-ethical act then no amount of educaton will stop them.
CBA et al led the march causing this issue, advice issues and standards. Who jumped up real quick to deflect the storm and openly stated- all our advisers will have degrees or out! The still to be formed education entity will have a job on their hands and maybe a transition course will evolve. In the meantime, the stated time frame will not work and this is because clowns have the power to push legislation without the required knowledge. We need a legislator with intelligence and it’s about time the professional bodies spoke louder and we planners objectively hammer local M Ps. Guess what, young degree qualified planners without life skills and ethics is a recipe for the next blow up.
The vicious cycle of the Australian Financial Planning Industry…
We are not seen as a profession due to ongoing issues and lack of qualifications >
We need to make change to be seen as a profession >
Wait I shouldn’t have to change I have experience! >
We are not seen as a professional due to ongoing issues and lack of qualifications.
Rinse and repeat.
I think Mr De Gori could do a lot to stem the adviser losses by actually leading the charge of representation of the SMALL advice practice when meeting legislators and other parties.
THe lack of empathy shown in comments and outcomes in the whole process from FOFA to LIF and media from the FPA over the last decade certainly caused my membership loss….whether it leads to careers change after 25yrs is another matter. The UK experience is different…learn and implement fairness into a compliance driven rather than client driven system.
Another fact that was not mentioned in this article that a large amount of the adviser network in the UK went insolvent from the insurance companies implementing longer responsibility periods, and thousands of them went broke as a result, perhaps the Australian insurance companies ie the Banks will see the same problem as I am sure they will get what they wish for paying less commission because they will not be getting any new business.
it is rather stupid in my opinion to make the study compulsory for the older planners that have been in the industry for many years, they are not going to become any more wiser than the experience that they have gotten over the years in the industry, does one really think that this is going to make a difference I certainly dont
Education of advisers is vital and certainly there are probably many who don’t meet the acceptable standard, however there are also many senior highly experienced advisers who must not be lost to our Industry. The possibility of those going back to university to gain a certificate would be few. These are the experienced advisers the Industry cannot afford to lose. I would expect that this would be brought into consideration, but thought it should be again mentioned