It will take time for the number of new industry entrants to level with those leaving, the FASEA chief has said, but advice will also need to market itself as a promising career pathway.
As captured in FASEA chief executive Stephen Glenfield’s opening statement to a parliamentary committee, there were around 900 potential new advice entrants enrolled in bachelor degrees or higher at the of 2019. Around 200 had completed their professional year (PY), with more than 75 passing the FASEA exam.
In contrast, Adviser Ratings analysis of the ASIC Financial Advisers Register showed around 4,378 advisers left the industry over 2019.
Mr Glenfield noted the FASEA educational standards and the requirement to have a degree to enter the profession is new and it will take time to catch on.
“By making this a career where you come in with a degree, where you get… PY training, where you do ongoing CPD like any other profession, we’ll ultimately attract good graduates in,” he told ifa.
“And you’d be hopeful that these numbers will increase as the years go by. Part of that responsibility rests with industry and promoting itself as a profession, that is a good place for people to come to, to get a degree and join into financial advice.”
Close to 50 per cent, or approximately 10,000 advisers have now passed the FASEA exam, with around 14 months of the transition period to profession remaining. The current overall pass rate on the exam is 89 per cent.
But stricter education standards are only one factor causing advisers to exit, alongside a fundamental restructure of the industry as larger players have left, Mr Glenfield added.
“There’s no doubt a lifting of standards and lifting requirements – not everybody wants to meet that,” he said.
“But ultimately, the outcome is a lifted level of standards for the industry, which ultimately is aimed to increase consumer confidence in taking financial advice, which is a benefit for both the consumer and the industry longer-term.
“This is significant change and it’s at a time of difficulty, even with COVID aside, this is a challenging time for advisers and I think they’re doing incredibly well in standing up and meeting these due standards.”
The FASEA chief appeared before the budget estimates economics legislation committee on Tuesday, where he was questioned on a number of factors, including CPD requirements.
In his opening statement, he had noted that there were concerns from advisers about some forms of CPD not meeting the education requirement. But FASEA had been guided by the Corporations Act, which stated in order to meet the education requirements, the CPD recognised must result in an equivalent qualification to a bachelor or higher degree.
Advisers are required to complete 40 hours a year of CPD, but the majority of it undertaken does not result in a bachelor level or above qualification, the opening statement said.
“This has sometimes been difficult for advisers to accept, particularly those who have considerable industry experience and regularly maintained their CPD requirements,” Mr Glenfield’s statement read.
Single disciplinary body looming
Looking ahead to next year, FASEA does not yet have a clear view of how it will be integrated with the single disciplinary body for the advice sector, which is now due to be established from the end of 2021.
Mr Glenfield commented that regardless of whether the government decides to merge FASEA with the body, the two will need to collaborate closely.
“FASEA is the standards setter, but the actual monitoring of the code and testing of compliance and taking any action for people not complying with the code will rest with the single disciplinary body,” he said.
“Regardless of what form it takes, there will be a need for FASEA to work closely with that body, whether if that’s part of the same body or as separate bodies … the key will be working together.”
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