Financial planning reforms impact practice staffing

Are you providing personal advice to retail clients on superannuation including SMSFs, life insurance, personal insurance and investments? Practitioners who are licensed financial advisers or employ advisers in their practices should be aware of the coming new professional standards framework.

These significant reforms follow a decade of consultations, working groups and draft and will impact those currently working as a financial adviser, considering becoming a financial adviser, as well professional accountants who may hold their own limited Australian Financial Services (AFS) licence or be a representative/authorised representative of a limited AFS licence.

It will also impact practices who employ a financial adviser, as they will need to consider the impact of these reforms on both their current staff, as well as consider how it may impact future staffing needs.

Overview of the new professional standards framework

Arguably the most significant change that will commence 1 January 2019 is the lifting of the minimum education requirement to become a financial adviser to a bachelor degree.  In contrast, the current training standards set by ASIC in Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146) are broadly equivalent to a diploma.

Professional Development: RG146 Compliance Soluion: designed to address the competency requirements outlined in the ASIC Regulatory Guide 146 (RG146).

What do the changes mean in practice?

If you are studying diploma or advanced diploma level training towards meeting the current RG 146 training requirements, this study will not be recognised as a pathway to become a financial adviser from 1 January 2019.

This means you will need to complete your studies and be authorised as a financial adviser by the end of 2018, to be eligible to transition into the new framework as an existing financial adviser.

If you are thinking of providing financial planning advice, but are yet to start your studies, you need to decide when you wish to move into this sector.  Either, this year under the current requirements or after 1 January 2019 when the new framework commences, noting the requirements are very different.

Comparison of the current and future requirements to become a financial adviser

Changes apply to existing advisers

If you do decide you wish to move into this sector before 1 January 2019, it is important to be aware the requirement to meet the bachelor degree (or higher or equivalent) will also apply to existing financial advisers. However, you will have until 1 January 2024 to meet this requirement and new pathways will be developed.

The Financial Advisers Standards and Ethics Authority (FASEA) are the standards body responsible for developing these pathways, as well as the other elements of the new framework.

On 20 March, FASEA released Proposed Guidance on Education pathways for Existing Advisers which proposes five different pathways for existing financial adviser, determined by previously completed qualifications.

Under its proposal, a related degree will include a Bachelor degree (or higher), regardless of when it was completed, with a major in one of the following disciplines:

  • Financial planning/Advice /Services
  • Accounting
  • Finance
  • Tax
  • Law, or 
  • Economics. 
At the same time, FASEA also released for comment a new draft Code of Ethics.  Once implemented, the Code and Standards within it will have the force of law, with compliance monitored through a new code monitoring framework yet to be developed.  Of note, the draft code proposes to require the informed consent of the client in regard to services, fees and maintaining advice records.  This is somewhat a new obligation for the sector.

The development of the pathways for existing financial advisers and the new Code of Ethics are significant elements of the new professional standards framework.

CPA Australia’s response

As such, CPA Australia is keen to engage with members on these important elements and has been holding a series of round tables during in April and May to gather feedback and understand the practical application of the proposals. A webinar and live chat will also be held during mid-May for members unable to attend the round tables.  This will help shape the organisation’s policy positions and submissions.

Further consultation is expected on the other elements of the framework including the professional year of experience and the exam, which all financial advisers will need to complete.

Further information on the new professional standards framework can be found on the CPA Australia website or the FASEA website.

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October 2021
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