The industry is right to be concerned about the potential for adviser losses as a result of the new education standards, considering a similar experience in the UK, said FPA incoming chief executive Dante De Gori.
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."
Comments powered by CComment
The FAAA emerged on Thursday as one of the most vocal critics of the government's QAR response, expressing significant ...
Minister Jones’ announced creation of a new class of advisers has partially overshadowed much sought after changes to ...
The FAAA says that advisers feel the AFCA complaints process is biased in favour of the consumer and they “bear a ...
Never miss the stories that impact the industry.
Get the latest news! Subscribe to the ifa bulletin