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.
‘Experienced’ and ‘Relevant’ provider tags will only confuse consumers: FAAA
The introduction of separate labels for advisers who qualify to practice advice via the government’s proposed ‘experience pathway’ will probably go over the heads of consumers, according to the Financial Advice Association of Australia (FAAA).
In a submission to the government’s consultation on the experienced pathway, which closed Wednesday last week, the FAAA argued that the labels “relevant provider” and “experienced provider” are terms “consumers would not understand or interpret as per the definitions within the law”.
The terms are designed to distinguish advisers who use the experienced pathway to qualify based on having ten years of experience and a clean record, from those advisers who meet the relevant degree requirement.
The FAAA’s concern stems from the possible implications each tag represents, and the scope for consumers to misinterpret them.
“The introduction of an “experienced provider” pathway is a divisive issue within the profession,” the FAAA continued. “Labelling providers on the FAR based on the pathway relied upon to meet the education standard risks creating two classes of financial planners/advisers and the potential for discrimination both from consumers and peers.
“For example, would a consumer consider a financial planner/adviser who is not registered as an ‘experienced provider’ (i.e. ‘relevant providers’) as being inexperienced?,” the FAAA posed in its submission. “Would a consumer understand that ‘experienced providers’ had not completed a course approved under the education standard; or that a ‘relevant provider’ has completed an ‘approved course’?
The issue is just one of several highlighted by the FAAA, which said the proposal addresses the need to acknowledge adviser experience but requires some serious amendments to the current format.
The most egregious fix required is the addition of a 10-year sunset clause, the association said, which will stop the experience pathway being used as an excuse to not complete education requirements for an entire generation.
In September 2022 the FAAA’s founding groups, together with the Joint Association Working Group, proposed the experienced provider pathway should include a sunset clause to end on 1 January 2032.
While about half of the FAAA’s members support the experience pathway in its current form, 68.9 per cent said they would support it if a sunset clause was embedded.
“While the FAAA still supports this position, we understand that this view is not supported by the government and note that the draft legislation proposes an unlimited “experienced provider” pathway,” the submission stated. “However, we wish to make it clear that the provision would have substantial support from the profession with the addition of a sunset clause.”
The FAAA has also called for a requirement for all advisers to complete an approved ethics course, and greater flexibility for long-term part-time financial planners/advisers (such as parents and carers).
