There is no correlation between poor financial advice and the absence of a degree, and new laws requiring higher education may result in unaffordable advice for consumers, argues Senator David Leyonhjelm.
During a Senate Economics Legislation Committee hearing last week, Senator Leyonhjelm questioned whether the degree portion of the proposed new education standards were necessary, saying it does not guarantee better quality advice.
"Are [the reforms] responding to the market? Are customers saying 'I would have greater faith in that [adviser] if they have a degree'?" he asked.
"I couldn't find any correlation between poor advice and the absence of a degree. And the presence of a degree doesn't fill me with any confidence. I've got three degrees and I guarantee I could not give any good advice."
Senator Leyonhjelm added that he was concerned about the potential for the cost of advice to skyrocket as a result of the degree requirement.
"[If] the capability to give to good advice is not dependent on a degree but you nonetheless require everybody who gives financial advice professionally to have a degree, you're reducing the pool. Therefore supply will be reduced and the cost will go up for consumers," he said.
"That's the concern I have. Ultimately we're worrying about the quality of advice and raising the bar to improve the quality of advice without regard for whether that advice will actually be affordable."
Responding to Senator Leyonhjelm, ASIC deputy chair Peter Kell said that while he agrees a single degree will not make a difference, it is part of a package of reforms that is expected to lift professionalism throughout the industry.
"I don't think anyone [is] suggesting that a degree alone is the magic answer to better standards and better outcomes in this space. There's a package of reforms that we believe will lift standards in this area... The degree is one of those," he said.
"But on that issue of a degree, the FPA would argue that its more qualified members are less likely to be the subject of ASIC regulatory action. Furthermore, our surveys show that clients have difficulty assessing the quality of the advice and therefore having those objective markers certainly helps."
Mr Kell also argued that because the new standards would only apply to personal financial advisers, the affordability of advice is not likely to be an issue.
"We're not talking about applying this standard to all advice... This is for personal advice at a higher level typically around more complex products. I think there is an argument that says that ought to require a higher [education] level," he said.
"The issue of accessibility and affordability is also one that we are strongly concerned about and that's why we actively engage with the financial advice sector on how they can provide, in a cost efficient manner, so-called scaled advice."
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