Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
‘Experience pathway’ plan released, with no sunset clause and a bizarre anomaly
The government released draft regulations for its controversial ‘experience pathway’ Tuesday night, with a notable omission from the plan; a sunset clause that would limit the amount of time advisers without relevant degrees can operate.
It also contained an unexplained anomaly that could see recently banned advisers skirt the rules.
The bill, Treasury Laws Amendment (Measures 4 for Future Bills) Bill 2023: Recognising 5 experience in the financial advice, will exempt advisers who have ten years of cumulative experience, as well as a “clean record”, from completing an equivalent relevant degree.
The ten years of “full-time equivalent experience” need not be consecutive, but must have been accumulated between 1 January, 2007 and 31 December, 2021.
The end of 2021 is also the cut off date for the clean record requirement; inexplicably, if an adviser has been banned, disqualified or been given an undertaking by ASIC after this date, they will still be eligible for the exemption.
To gain the exemption, advisers must declare they have met the criteria and submit (via their licensee if under an AFSL) the notice to ASIC within 30 days of the 1 January, 2026 qualification deadline.
Separately, the bill also cleans up some operational anomalies around the new entrant requirements for advisers. If an administrative change in courses precludes a potential new entrant from being qualified, they finish their studies earlier than the prescribed timeframe, or they complete a requisite unit with separate providers, they can apply to have their academic transcript approved.
In a further move, advisers who are also registered as tax agents will no longer be required to meet the additional education requirements. “This removes the duplication of education requirements, enabling those financial advisers to provide tax (financial) advice without needing to undertake additional study,” the draft states.
Stunning reversal
Since the carve-out from the education requirement was first announced by then-shadow financial minister Stephen Jones, then adopted by Jane Hume in her former role as financial services minister, it has been beset by controversy.
Most advisers who already qualified under the relevant degree requirement when it was announced in 2017, or undertook extra study to do so, are concerned that the exemption will roll back efforts to professionalise the industry in the wake of the Hayne Royal Commission.
Those that took extra study to qualify also rail against the timing of the proposal, with some considering a class action to recompense advisers for the time and money spent acquiring education they were told they needed, only for the requirement to be watered down.
Current financial services minister Stephen Jones (pictured) has put blame for the fracas at the feet of the previous liberal government, stating in a media release the “mishandling of the new education and qualification framework… pushed some experienced advisers, with no history of misconduct, out of the industry.”
The government expanded further on the “practical implementation issues” that have driven the need for an exemption within the draft regulations, highlighting the need to boost dwindling adviser numbers.
A generation away
Those in opposition to the experience pathway, and many of those that support its intent, have expressed concern that there is no dated end point or ‘sunset’ embedded in the proposal.
In effect, the current draft allows for a 35-year old adviser who qualifies for the exemption to operate without a relevant degree for another 30 or so years.
After the advice industry was told the relevant degree requirement was a crucial step to being considered a profession, the government is now saying both that it is not considered vital anymore, and that it won’t be a priority for another generation.
While the Financial Advice Association Australia (FAAA) supports the experience pathway, it stressed the need for a sunset clause in a response to the draft regulations.
“We believe that relevant experience is an important element to maintaining the required standard for professional, quality financial advice that will provide the best outcome for Australians,” FAAA CEO Sarah Abood stated. “That said, we continue to feel strongly that there should be a time limit on the pathway such that a relatively young adviser does not continue to practice indefinitely without relevant qualifications.”
The consultation will close May 3rd.
