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With a number of standards in ethics and education currently under review, the FPA Policy team report on recent activity and next steps.
Stalemate on FASEA Standard 3
After a broad consultation with professional and consumer stakeholders, outgoing regulatory body FASEA have left Standard 3 unchanged in the Code of Ethics. Just before winding up at the end of last year, FASEA put forward two new options for the wording of the Standard, along with a third option of leaving it unchanged.
As a proposal in response to “ongoing commentary” from stakeholders that the current Standard is “unworkable”, it’s not surprising that financial planners came out strongly in favour of changing the wording. Consumer groups, on the other hand, want the Standard to remain as is and this was the final decision taken by FASEA.
This is particularly concerning for financial planners as ASICs facilitative compliance approach to Standard 3 came to an end on 1 January 2022. With all financial planners now expected to demonstrate compliance, with no leniency for best efforts, many will still have concerns as to how best to achieve this in practice.
For any FPA members looking for further guidance on Standard 3, our Policy team have put together a short video with practical advice to help financial planners get a better understanding of how to meet their obligations.
While FASEA decided not to take things further with Standard 3 before winding up operations in December 2021, we may yet see changes introduced to this section of the Financial Planners and Advisers Code of Ethics. As the code now sits within Minister Hume’s portfolio of Superannuation, Financial Services and the Digital Economy, it will be up to her office to determine what steps could be taken to address ongoing concerns from the profession.
Exploring new education pathways
When the opposition introduced the idea of an experience pathway to meet education standards in financial advice, the Treasury were quick to counter with a consultation on a proposed 10 year experience pathway. Under this proposal, financial planners would be considered fully qualified to practice with 10 years’ experience in the profession in the last 12 years and a relevant degree.
Before responding to the consultation paper in February 2022, the FPA Policy team surveyed members, collecting over 2,500 responses, including 1000+ written comments. The topic thread in FPA Community also included around 150 posts and our team received hundreds of direct responses. This is an exceptional level of engagement from members and we really appreciate their comments and ideas on this topic. Our member community will always have a vital role to play in informing our written responses to government and regulators on policy issues like these.
“83% of FPA members, irrespective of age or experience have already met or are undertaking the study required to meet the existing education standards which the Government set through FASEA – at considerable cost to themselves in time, money and opportunity cost in their practices. These members have let us know in no uncertain terms that they feel the proposal undermines the commitment they have made to professionalisation to win the trust of consumers, Government, regulators and the media and support their colleagues and the sector more broadly.”
FPA Submission in response to Financial Adviser Education Standards consultation, 1 February 2022
In the first instance, we recommend putting any change to education standards on hold pending the outcome of the quality of advice review. As this is expected to share findings on how the profession and services to consumers have been impacted by the many changes in the financial advice policy and standards framework in recent years, it makes sense to take account of these insights in making any decision to overhaul education pathways and standards.
The FPA and our members welcome the opportunity to amend the education standard to take account of professional experience and education undertaken outside of the current requirements. However, the proposed experience pathway approach is a setback for the education standards needed to demonstrate professionalism in financial advice and give consumers confidence that their financial planner will have the skill and competence required to meet their needs and serve their interests.
As it stands, the FPA take the view that the proposed experience pathway is too broad and needs a more targeted approach to be effective in upholding professionalism and securing consumer trust. As a result, our submission on this proposal, includes a second recommendation to make the proposed experience pathway fit for purpose – increase the experience requirement to 15 years’ experience in the last 20 years and include a 10-year sunset by which time the financial adviser is required to have ceased providing advice or met the education standards.
Our third recommendation is to introduce a competency based framework. This solution is designed to recognise certain competencies financial planners have achieved through their experience as a practitioner without undermining the professionalism journey of financial advice.
FPA Recommendation 3. The FPA Recommends the Government adopt a competency framework for the financial planning profession which recognises both education and experience to demonstrate competence at AQF7+ to replace the existing education framework. This will benefit existing financial advisers, irrespective of years of experience in providing pathways to demonstrate competence with flexibility of completing study or demonstrating competence.
Broadly speaking, this proposed framework gives financial planners the chance to either study and achieve an educational standard to demonstrate competency or pass a competency assessment to meet an agreed education standard.
For more detail on the proposed framework and how it is designed to meet the Royal Commission recommendations on education standards in financial advice, you can read the full submission to the Treasury on their proposal paper in relation to Financial adviser education standards.
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