Roy Keenan from Yarra Capital Management shares insights with James Dunn from The Inside Network on the role of active management. The Inside Adviser
After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
Experienced adviser pathway… is it a free pass?
While the financial services minister intends to give some advisers an exemption from the education requirements with the proposed introduction of a Experienced Adviser Pathway (EAP), these advisers would do well to remember that successive governments have displayed a habit of moving the goalposts.
Those that have ten years of experience and a clean record might be getting the green light for now, but that light could turn orange, then red, at a moment’s notice.
The purpose of the current education requirements is to protect consumers by ensuring that advisers possess the necessary knowledge and qualifications to provide competent and ethical financial advice. These requirements are not expected to change, and the practice of relying solely on experience without the required qualifications may not be sustainable.
It stands to reason that if the EAP, combined with an eventual uptick in new entrants, brings new entrants into the industry, policymakers will maintain their stance on the importance of adviser education.
Since the current legislation came into effect on January 1, 2019, there has been a significant decline in the number of advisers, decreasing from 26,500 in 2019 to less than 16,000 in 2023. This decrease emphasises the insufficient number of advisers available to meet the increasing demand for financial advice in Australia.
Experience vs. education
The introduction of the EAP has generated divided opinions within the FAAA member base. According to a survey, 50.9 per cent of members support the pathway, while 49.1 per cent do not.
This raises the question of what holds greater importance when it comes to providing financial advice: tertiary qualifications or experience.
The industry acknowledges the value of real-life advisory experience and the wisdom gained from it. Many advisers can recall their initial struggles in establishing personal connections with prospective clients due to limited experience.
While technical aspects such as investment portfolios, risk management strategies, and cash flow modelling are important, what truly matters to clients is peace of mind, a sense of well-being and the ability to pursue the life they desire. Focusing solely on technical aspects may result in neglecting clients’ core needs.
Understanding clients and inspiring them with a course of action requires more than textbook knowledge; it requires real-life experience.
However, technical knowledge forms the foundation for providing sound advice, particularly when dealing with complex matters such as self-managed super funds, aged care and structuring. Advisers may find themselves lacking the necessary knowledge and skills to fully assist clients, limiting their advice to their areas of expertise.
Combination the key
In the rapidly changing landscape of the financial planning industry, it has become increasingly challenging for advisers to differentiate themselves from their peers. Education standards not only help protect clients but also elevate the professionalism and credibility of the financial advisory profession.
Regardless of the outcome of any proposed changes to education requirements, advisers who are currently pursuing their studies should continue to do so. This ongoing education is not only a means of safeguarding advisers from unforeseen future changes, but also provides a way to ensure advisers are well-prepared to provide the best possible advice for their clients.
The most successful and respected advisers in the field are those who possess a combination of technical expertise and strong interpersonal skills. As the financial planning industry continues to evolve, advisers who excel in both areas will thrive and have a lasting impact.
