Adviser entry requirements ‘disproportionate to the level of risk’: CPA Australia

In the Productivity Commission’s interim Building a skilled and adaptable workforce report, the research and advisory body noted that its consultation on occupational entry requirements (OERs) had pointed to financial advisers facing excessive obligations.

It had found that these requirements are “disproportionate to the level of risk, contributing to a decline in the number of financial advisers, which has limited the public’s access to affordable advice”.

The Productivity Commission also noted that the imposition of the more stringent standards following the royal commission, while aiming to “improve consumer outcomes and restore confidence in the profession”, had reduced the pool of potential entrants.

“From 2019 to 2025, the number of advisers fell from 28,000 to fewer than 16,000 which has reduced the public’s access to affordable financial advice,” it said.

“In response the Australian Government is reforming entry pathways to ensure Australians have access to high quality, accessible and affordable financial advice.

“Proposed changes to the education standard include removing the requirement to hold an approved qualification focused on financial advice. This will be replaced with a requirement to hold a bachelor degree or higher in any discipline, complete minimum relevant study in areas such as finance, economics or accounting, and complete prescribed accredited financial advice subjects such as in ethics, law and regulatory obligations and the financial advice process.”

With the study time expected to halve for most commerce, economics or finance students on the back of these proposed changes, the Productivity Commission said the “remaining professional standards will continue to support the overall development of financial advisers”.

“OERs should exist only where there is a clear and demonstrable risk to consumers or workers that cannot be addressed through less restrictive and costly means,” the report recommended.

CPA Australia has welcomed the acknowledgement, with chief executive Chris Freeland stating that the draft recommendations could be an encouraging first step to achieve reforms for financial advisers.

“We’re pleased that the Productivity Commission has acknowledged our calls for an overhaul of the entry requirements for financial advisers, which is ultimately having a detrimental effect on the public’s ability to seek professional financial advice at a time when they need it most, such as nearing retirement,” said Freeland.

“The cumulative effect of the regulatory burden imposed on the profession in recent years has demoralised advisers to the point where many are now walking away from businesses they grew from the ground up, while fewer new professionals are entering it to fill the gap because of the current entry requirements.

“Government needs to work constructively with the profession to understand these issues and begin to address them before the number of financial advisers reaches a critical level. The Productivity Commission acknowledging that entry requirements are disproportionate to the level of risk is a positive step in the right direction.”