Home / Opinion / Education carve-out should come with separate adviser designations

An approved degree doesn't necessarily make for a better adviser, but if the government wants to get the experienced pathway legislation right it must disclose which pathway an adviser took to accreditation.

If the government goes ahead with its plan to allow advisers with ten years of experience and a clean record to operate without an approved degree that most of the industry already has, consumers should at least be informed whether their adviser has met the education requirements or been approved via the carve out.

Demarcating advisers based on their method of accreditation is also a fair concession to the advisers who sacrificed their time and money to gain an approved degree. After years spent convincing advisers that an approved degree was the benchmark to professionalism, the government has a responsibility to at least validate this assertion by recognising the qualification in front of consumers.

Putting aside personal opinions on the experienced pathway (which makes sense at this point, given the government’s stated commitment), it is clear that the change will create two-tiers of qualified advisers; those with, and without, an approved degree. Those who worked to meet the education requirements, in other words, and those who didn’t.

This does not mean one tier is better than the other. Nor does it reflect on either advisers’ ability to do their job.

Yet disclosure is a core component of the regulatory framework around advice.

It’s reasonable to assume some clients may want to know whether their adviser has an approved degree. It’s also possible that some clients may not care, that they may have an existing relationship with their adviser and value that adviser’s expertise. An approved degree isn’t a requirement for trust between a client and their adviser.

How much importance a client places on the attainment of an approved degree shouldn’t matter, however. What matters is that they have the choice of deciding how important it is to them.

In its submission to the draft legislation proposing the education pathway, the Financial Planning Education Council (FPEC) made this point clear, stating that if the plan to create two pathways was legislated, then people should at least be made aware of what path their adviser walked.

“The ASIC Financial Adviser Register [should] differentiate between the two approved pathways (such as ‘Qualified Financial Adviser’) to make it easier for the consumer to identify when an approved degree has not been completed,” the submission stated.

“A broad requirement of ten years’ full-time equivalent work experience is insufficient to demonstrate possession of the appropriate knowledge and competencies required of a financial adviser,” it continued. “We also believe it is important that the scope, quantum and quality of the advisers’ experience be documented and assessed by the AFSL holder.”

(It’s worth acknowledging the academic council’s conflict in the matter. The point isn’t any less valid because the cohort making it have a vested interest in the outcome.)

The idea of further disclosure, as we enter a supposed era of regulatory tightening catalysed by the Quality of Advice Review, isn’t entirely palatable. Yet disclosure of an adviser’s education status is a miniscule addition, and a worthwhile one.

The kind of advice scandals seen in the 2010s leading up to and including the Hayne Royal Commission should be less prevalent moving forward, given the industry has flushed out a lot of bad actors. But they will come, and when they do any damage will be heightened if it emerges that the victim was never informed that their adviser didn’t hold the same education status as the majority of the industry.

Of course, nefarious intent has little, if anything, to do with education status. An approved degree doesn’t preclude anyone from breaching the Corporations Act or the Standard of Ethics.

But that’s not the point. Doing the right thing by consumers is what counts, and they deserve to know what path their adviser took to accreditation.