The Financial Adviser Standards and Ethics Authority (FASEA) has released for consultation its latest guidance on proposed new education standards for licensed financial advisers in Australia. While the 20 March update provides more information than the initial guidance released in December 2017, including clarification on degree equivalence for existing advisers, many industry stakeholders still have concerns. 

FASEA’s education guidelines propose that existing advisers without a degree, or who hold a degree in an unrelated field of study, must complete an approved graduate diploma (comprising eight subjects) by 1 January 2024. Alternatively, advisers who do not have a degree may complete other approved qualifications (degree or masters) by the same date. 

Enrolment for each individual subject costs about $3,500 through providers such as Deakin University, and there is speculation that the total bill of $28,000 could push some older advisers out of the industry. 

Under the proposed reforms, existing advisers with a ‘related degree’ that has a major/ specialisation in a discipline within a related field of study (financial planning/advice/services, accounting, finance, tax, law and economics) – which covers chartered accountants – will be required to complete a three-subject bridging course by 1 January 2024 plus pass a national exam by 1 January 2021. Existing advisers with a related degree and a ‘related postgraduate qualification’ will only be required to complete a one-subject bridging course (FASEA Code of Ethics) by 1 January 2024.

Understandably, many members of Chartered Accountants Australia and New Zealand are concerned that these requirements fail to recognise the extensive qualifications and experience they already have. 

However, Dr Deen Sanders, Chief Executive Officer of FASEA at the time of interview until his resignation on 12 April 2018, was unable to shed light on whether chartered accountants – including those who hold the CA Financial Planning Specialist designation – would be exempt from any of the proposed bridging course requirements. “At this early stage of the consultation process, we want to encourage an open raising of feedback and questions, ensuring an opportunity to hear from all stakeholders, before drawing conclusions,” he said.

No question the industry needs an overhaul

No one, least of all consumers, are likely to argue that the financial advice industry needs a shake-up. A highly public series of scandals involving everything from inappropriate advice to vulnerable clients to forged signatures and other dodgy dealings among some of our largest financial institutions have tarnished the broader industry. 

Sarah Davidson, Leader of Government Affairs and Financial Advisory Services at Chartered Accountants Australia and New Zealand, stresses that Chartered Accountants ANZ supports the legislation to raise the standards of financial advisers in Australia. She says it will help build consumer trust, confidence and engagement in the advice industry, adding, “We believe it is vital that more Australians are able to obtain ethical and professional financial advice.”

Adrian Raftery FCA, an Associate Professor in the Faculty of Business and Law at Deakin University, points out that only one in six Australians currently seeks financial advice despite significant issues that affect the financial wellbeing of many households, including under insurance and a serious lack of retirement planning. “Our research shows [that] if all financial planners had a degree, consumers would be more likely to seek out professional advice,” he adds.

(Pictured: Adrian Raftery FCA)

Peter Quinn, a chartered accountant who also offers financial advice from his Sydney-based practice, Quinn Consultants, is more succinct: “The financial planning industry is unlikely to get anywhere unless the standards are raised.”

Nevertheless, many Chartered Accountants are concerned that their qualifications, experience, and ethical standards will not be given appropriate recognition. 

AccountantsIQ Founding Director, certified financial planner and CA, Bronny Speed, explains that CAs already hold a “related degree”, do ongoing CPD and adhere to CA ANZ’s Code of Ethics. “Many CAs who provide personal financial advice have also completed an approved financial planning course, further CPD in the areas of financial advice for which they are authorised, and have significant years of relevant experience,” she said.

According to Davidson, Chartered Accountants ANZ has been seeking clarity from FASEA about where CAs fit in the proposed reforms, and has been consulting members, education providers, other professional associations and industry stakeholders on the issue. “We are seeking clarification from FASEA and education providers on what constitutes recognition of prior learning for CAs who have further qualifications, experience and continuing professional development in addition to their ‘related degree’,” she says. “This will help determine which components will qualify for recognition as a ‘related post graduate qualification’ and may therefore require CAs to complete only a one-subject bridging course by 1 January 2024 rather than a three-subject bridging course.”  

Raftery also sees significant overlap between chartered accountants’ skills and qualifications and the proposed new requirements. “Chartered accountants already have extensive knowledge of corporate law, which is one of the bridging course subjects, and they already abide by a strict code of ethics,” he says. 

Impact on the industry

If the education requirements take effect as they currently stand, Davidson says some chartered accountants may stop providing financial advice – deterred by both the cost and time required to complete a bridging course and an exam. “It’s particularly a risk for sole practitioners, small and medium-sized practices, and those in rural and regional areas,” she says. Raftery also points out, “For a chartered accountant, who is only completing a handful of statements of advice each year it may not be worth keeping up with the latest changes as annual costs will include extra professional indemnity cover, extra CPD each year and dealer group charges are also likely to rise.”

That said, Peter Quinn, who is at the coalface of the financial advice industry, has made a significant investment in both skills and qualifications. Not unreasonably, he expects others to do the same and is happy to see higher barriers to entry. “Knowledge is critical, if you don’t have the knowledge your advice standards will be poor,” he says. 

An opportunity to have your say

Davidson says FASEA’s consultation process and communication was somewhat ad hoc in its early stages, which has attracted criticism. However, she says FASEA’s latest guidelines provide a more solid foundation for consultation and encourages members to give their feedback to Chartered Accountants ANZ as early as possible so it can be considered in the preparation of CA ANZ’s submission. 

Raftery, who is also the course director for the financial planning programs at Deakin University, plans to ask in his submission “whether it’s really necessary for someone who has a relevant degree and additional qualifications to complete a bridging course”.

While Raftery is confident FASEA will listen to the professional community, he cautions, “The key is to deliver constructive criticism and come up with genuine alternatives that are more likely to be considered.”

Chartered Accountants Australia and New Zealand will continue to keep members up to date with its submission process and the outcomes of the consultation period.