FASEA had its origins in the Ripoll inquiry (or more correctly the parliamentary joint committee on corporations and financial services) held in 2009. This inquiry was hot on the heels of the GFC where we had seen a credit market crisis that had effectively blown up a number of financial products and their providers. It also focused on the antics of Storm Financial – the now infamous financial planning group that created havoc among its clients by often highly inappropriate double gearing strategies. Both of these events caused significant financial loss for some investors.
Advisers were clearly in the crosshairs as a result of this as it became apparent that poor sales practices (as opposed to advice practices) were to blame. Many would say that we have not been out of the crosshairs since. I use a lethal analogy here on purpose because many advisers I talk to certainly feel under fire.
I took the time to re-read the Ripoll report again (obviously a boring life) and was surprised to see that there is no recommendation to actually hold an exam for all existing advisers. Recommendation 9 in Ripoll states: “The committee recommends that ASIC immediately begin consultation with the financial services industry on the establishment of an independent, industry-based professional standards board to oversee nomenclature, and competency and conduct standards for financial advisers.”
I can’t agree more with this recommendation and, as many of you will have previously read, I strongly support the development of standards for financial advisers and planners. We need these as a means of being able to identify appropriate, as well as inappropriate, financial advice.
Unfortunately, we have now got FASEA. Tasked with the setting of education, training and ethical standards for financial advisers but not with the identification of what education and training standards should be taught. And what is the first big ticket item that we have from them – the financial adviser exam. A compulsory exam of 3.5 hours to be completed within two years from the introduction of the new standards. Oh wait, make that 18 months as the exam was only released in July.
So, what will the exam cover – superannuation, Centrelink, life insurance, securities, investment strategies, cash flow management, estate planning…
No. It will cover regulations, ethics and financial advice construction.
There is no doubt that a single exam would be unable to assess competencies for all the areas mentioned above, and there has been no discussion at all regarding those advisers who actually specialise and don’t work in all areas. But surely this should have been the focus of FASEA discussions if you are going to implement such as blunt instrument as a single exam.
But let’s get back to the actual exam for a moment. I have reviewed the suggested reading for advisers to prepare for the exam (not the extension reading – just the suggested reading) and this runs to 2,196 pages of reading. Now I’ve been around higher education for some time now, but I have never seen anything like this before. Effectively, FASEA is saying just do the reading and you should be OK. WHAT!
Not to put too fine a point on it, but this is an examination that has the capacity to end careers and disrupt lives and this is the level of support provided? Perhaps there is an expectation that advisers will undertake professional courses to help them pass the exam at their cost, in addition to the $594 for each sitting of the exam.
As far as I can establish, this will be the first time in Australia that existing professionals will be asked to pass an exam just to continue practising.
If I wanted to get all ‘bolshie’ – I’d probably suggest that we just boycott the exam, but I doubt there would be many who would want to follow me. There is simply too much at stake to take the chance as not passing the exam by the prescribed time will mean a brand-new entry into the profession – including a professional year and perhaps fresh qualifications.
So here we are again – being driven by compliance rather than quality of advice. I don’t know about you but I’m getting sick of it!
Paul Moran is a CFP and SSA who started practice in 1995. He was the IFA Australian Financial Planner of the Year in 2004 and was a member of the AFR Smart Investor Top 50 in 2004, 2005 and 2012. He is a managing partner of a self-licensed practice in Carlton North, Victoria. He is firmly committed to continual education and lifelong learning and holds master’s degrees in business administration, taxation and financial planning. With a bit of luck, he will finally complete his doctorate this year.
In answer to Nick – I understand your points but i’m not sure you understand mine. We have never been self-regulated as a profession and while we all suffer from the poor behaviours of a few, the only way regulation has been implemented is to inflict ever increasing regulations on everyone. Clearly, regulation hasn’t stopped people speeding or committing crimes but rather should act as a deterrent.
This exam is poorly thought out and does not provide for any level of technical competence to be demonstrated unless you confuse compliance with technical competence (the point of my article). I have not sat the exam and plan to sit it in September but I truly feel for those who have not sat this kind of exam either ever or certainly in recent years. I have no doubt that it is a daunting prospect.
Common sense does not seem to be in the compliance( fasea ) gods thinking
Couldn’t agree more with what you have said. Would happily boycott should we get the numbers.
It’s being driven by regulation and legislation, not compliance.
One of the benefits of studying for the FASEA National exam is discovering the clauses a lot of interesting subregulations in legislation. You could drive a truck through all of the inconsistencies in parts of the Corps Act. I suspect the Govt & all of the product providers are really going to regret having over 10,000 trained experts on the Corps Act out there in the future. Particular the high profile compulsory super product providers who are currently paying salaries & bonuses to their tied agency sales force, whose numbers are fast growing under the protection of the Intra-Fund advice exemptions. Looks like we are quickly creeping back to the bad old days of tied agents. Just waiting for the personal loan backs to be offered once again…lol
Where is Jane Hume on all this – we’re all sick of it and it is a complete waste of time. How about we get politicians to sit an exam on ethics and budget deficits and if they create a deficit they lose their career…..
You ain’t alone Paul! Honestly, how many more red flags can there be relating to FASEA before it’s completely shut down and everything they’ve implemented, thrown out? And the money they’ve stolen via their obscene incomes, paid back?
It is simply staggering that the stubbornness and absolute ignorance that the damage being caused by FASEA is allowed to continue. I won’t be subscribing, I can tell you that!
Couldn’t agree more. Well said.
I am shocked !! A very sensible article with an experience adviser that makes factual sense without a product flogging institution or university anywhere to be seen . Well done Paul . Perhaps the FPA / IFA should look at this Article and see the local fed politicians to discuss !!!
It’s a knee jerk reaction to a problem that can not be fixed by education or test.
Your either a good adviser or you are a salesman in a suit. The salesman can and will jump over these stupid hurdles and revert back to what’s best for him IE Fee for service rort and $4000 soa charges.
A good adviser with years of quality experience has probable had enough of this FPA course & membership flogging and stare at the education burden and just give up. No longer willing to put up with the pointless compliance nonsense.
Clients who need advice will no longer be able to afford it, those than can afford it will be rolling their eyes at the utter debacle that is compliance.
The FPA caused this, the FPA will die by this.
Good night FP industry.
Thank you Paul. I totally agree.
Good summation Paul, I sat the practice adviser exam with Kaplan on Friday and found it very very challenging. In my experience, most of the elements being tested were things that I am somewhat familiar with but would hardly consider myself an ‘expert in’. While some may breeze through I would think many others would feel similar. I spoke with another colleague today who suggested that the Ethics subject offered by Kaplan may provide a good base for the practice exam – however, there is still no guarantee that the practice exam is an accurate reflection of the real exam. While I would say most advisers now accept that this is the way things are going to be and there is absolutely nothing we can do about it, therefore, we are willing to bite the bullet and subject ourselves to the training and learning regime being laid in front of us by our overlords, that said with 16 months to go and with very little practical guidance or training to prepare the way this is being handled and [b]the way we are being transitioned is a disgrace.[/b][b][/b]
What Paul doesn’t tell us is whether or not he did the exam in June ? I suspect not because I did and found it to be fair – but not easy. Yes, it does require you to do the reading and in essence, tests your understanding of conflicts, reasonable basis and the rules you operate under. Not that difficult if you are behaving as a true professional, bloody hard if you are not. The reason we are all forced to do this is quite simply because self regulation has not worked. So instead of blaming the government, FASEA and everyone else, blame your colleagues. We had the opportunity to do the right thing and chose to ignore the inevitable.
Great article Paul and I assure many of us feel the same way. Something needs to change with both the Government and FASEA placing a hold on things or at the very least extend the dates for completion..
Well spoken Paul…you should be on the FASEA Board.
Can we get some of this good information out to the mainstream media instead of just in financial planning publications so that the world at large can understand what is going on and hopefully help our movement?
A refreshing voice of reason.
I will say it again – we have FASEA because those in charge then at the AFA and the FPA were asleep at the wheel – they did not study the proposal in full NOR think of the “unintended” ( or intended, depending on your state of mind) consequences. Both saw dollars in being a designated “Professional body” under FASEA & TPB. Both bodies were so lax they failed even to see the potential impact on their educational revenue, somehow figuring the were in the professional vanguard because both had developed expensive “designation” courses. The reward – each will probably lose 20% of adviser memberships in the next year, and any respect they once had from advisers is burnt up. My prediction is by Jan 2024 both will be gone !