FASEA’s changes in education and professional requirements for financial planners are aimed at building a stronger and more ethical profession.

The financial services industry is certainly facing volatile and testing times when it comes to regulation and education standards. Now that the Financial Adviser Standards and Ethics Authority (FASEA) has completed its final consultation phase and the legislative documents are being released, one would think this process was complete.

Given the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the following comment probably sums up the importance of educational qualifications and ethical behaviour as key elements of the professionalisation of this industry. The following excerpt is from the Royal Commission, where Anna Smith, a current loans officer, stated:

“…they’ll employ anybody. People off the street. People come from their parents’ restaurant, from selling second-hand cars. And that’s not necessarily a bad thing. I don’t have a uni degree. I grew up pretty rough. I had to take care of my siblings financially. The bank gave me a chance.”

Nonetheless, in her opinion, some of her colleagues seem pointedly lacking in any kind of ethical education or moral compass.

If consumers are to have their confidence restored, there needs to be a discernible change in both the behaviour and educational entry bar for people who want to be working as professionals in this field.

What is a profession?

You might ask why all the talk about professionalism, as may advisers already see themselves as professionals.

There are many facets to an industry being recognised as a profession. While colloquially people on the street may refer to any occupation done to earn a wage as a ‘profession’, this is not what the word actually refers to. The Australian Council of Professions (2019) provide the following definition:

A Profession is a disciplined group of individuals who adhere to ethical standards and who hold themselves out as, and are accepted by the public as possessing special knowledge and skills in a widely recognised body of learning derived from research, education and training at a high level, and who are prepared to apply this knowledge and exercise these skills in the interest of others. It is inherent in the definition of a Profession that a code of ethics governs the activities of each Profession. Such codes require behaviour and practice beyond the personal moral obligations of an individual. They define and demand high standards of behaviour in respect to the services provided to the public and in dealing with professional colleagues. Further, these codes are enforced by the Profession and are acknowledged and accepted by the community.

From this we can see that ethics and professionalism go hand-in-hand. A professional not only looks and acts the part; he or she must do so with legal, ethical and honest intent. Truth, open disclosure and sincerity are paramount to ethical professionals.

We might also look to other existing professions to see what it is they have that makes them different from a non-professional occupation.

If we were to take the path of other professions – such as law, accounting, medicine and nursing – we find the minimum educational requirement is an undergraduate degree in the discipline. The educational minimum is then extended by adherence to additional requirements, such as a professional year, continuing professional development requirements, adherence to codes of ethics and conduct.

It is apparent that FASEA has considered these existing models and is looking to be consistent with existing professions by continuing along this same pathway. Whilst these requirements may be new for the financial advice industry, they have existed in other professions for many decades. In some ways, these requirements are indicative of a maturing industry looking for acceptance by society as a profession.

Only time will tell

There are those in the industry who are extremely resistant to any of these legislative changes and believe the whole process is flawed and have resulted in an unnecessary and costly burden on advisers. The constant question from this group is: ‘Why do I have to study after all these years of practice?’

I believe that many advisers should ask a different question: ‘Why has it taken this industry so long to raise the education bar in line with other professions?’

I have been involved with the financial advice industry over the last two decades and found that there had been many times where the industry had ample opportunity to self-regulate but instead, chose mere compliance with RG146 as a minimum competency for education and training.

Some advisers were able to meet this educational requirement by doing as little as undertaking a course over a two-week period. Is that really good enough?

Would you be happy to consult a medical practitioner whose only qualification was a diploma or advanced diploma in medicine? Just as a doctor can physically damage a client, a financial adviser can devastate a client’s financial health with no possibility of recovery. We need only site the terrible cases reported in the media.

Given this history, should we be surprised that the Government has now taken education and professionalism out of the hands of the industry and enacted legislation with the creation of FASEA to lift standards and client confidence, as experienced in other professions?

Will these changes actually result in better quality advice, which is both ethical and professional? Only time will tell.

As I have previously stated, education standards are only one element of a profession and cannot exist in isolation without the support of practitioners to invest in their education and professionalism.

Rather than a burden, I believe, as do many advisers I have spoken to, that these changes are long overdue. This is an opportunity to raise the image of financial advisers, enhance their credibility and the industry as a whole, with resulting growth in their businesses and client satisfaction.

However, much confusion still remains, particularly around the existing adviser space and how the new educational requirements will be implemented.

Mapping individual pathways

For the majority of existing advisers, the most likely pathway will be a Graduate Diploma or The Bridge units (1,3 or 4), depending on previous qualifications.

However, under the legislation, each adviser’s licensee is responsible for mapping new or existing advisers against the new FASEA pathways policy document. These mapping exercises are extremely complex, given the range and age of education qualifications previously undertaken. In many cases, each adviser will need individual advice for their own circumstance.

For many licensees that are not familiar with the new approved education pathways, this could be tedious, time-consuming and possibly flawed advice, due to the lack of expertise relating to these required education standards.

To assist in this task, some institutions are offering a mapping service for a fee, other providers (such as Western Sydney University and the FPA’s Return to Learn portal) are offering this service without charge to assist advisers in choosing the most appropriate pathway. In addition, Western Sydney University has developed a Challenge Pathway to assist existing advisers, who have extensive industry experience, with their education qualifications.

More details can be found by clicking here.

Sharon Taylor is an Associate Professor at Western Sydney University and Chair of the Financial Planning Education Council (FPEC).

References

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry retrieved 24 /2/2019 <https://financialservices.royalcommission.gov.au/Pages/default.aspx>

Australian Council of Professions (2019) ‘What is a Profession?’ retrieved 25/2/2019 <http://www.professions.com.au/about-us/what-is-a-professional>