The Federal Government have clarified aspects of the new professional standards regime for financial advisers. The regime will commence later than originally planned, and financial advisers will not be required to attend university.
The new professional standards regime for financial advisers was unveiled on 3 December 2015. In summary, the new regime requires new financial advisers to hold a relevant Bachelor degree, pass a standardised exam and complete a minimum number of CPD hours. Transitional arrangements apply to existing financial advisers, however the new regime has caused widespread concern amongst the financial services industry, on the basis that most existing advisers do not hold Bachelor degrees and have limited time to comply with these requirements. On 28 April 2016, the Government clarified some aspects of the regime which should effectively mitigate this widespread concern, including:
- Education Standards Body: the Education Standards Body will be a Commonwealth company with responsibility for administering the professional standards regime, including developing and setting the industry exam, developing the code of ethics, and determining the education requirements for both new and existing advisers.
- Bachelor Degrees: existing advisers will not be required to have a Bachelor degree. Advisers will only need to reach a 'degree-equivalent' level of education. There will be a number of flexible pathways for advisers to satisfy this, including through the completion of 'bridging courses' approved by the new Education Standards Body.
- Commencement Dates: the Federal Government is also proposing to extend the amount of time that existing advisers will have to reach the required degree-equivalent status and to pass the exam requirement. The education and exam requirements are now proposed to commence on 1 January 2019 for new advisers (previously 1 July 2017). Existing advisers will now have until 1 January 2024 (previously 1 July 2019) to reach degree‑equivalent status and until 1 January 2021 (previously 1 July 2019) to pass the exam.
- Exemptions from exams: there is a proposal for the Education Standards Body to have the power to exempt existing advisers, on a case-by-case basis, from the exam requirement. This power is intended to be used only in the case of highly experienced advisers with exceptional skills and qualifications.
This is a positive sign for existing advisers, and shows the Government’s flexibility towards this new regime. Financial advisers will not need to worry about the commitments associated with attending University providing they complete other courses approved by the Education Standards Body.
Looking forward, financial advisers should approach this regime positively – additional knowledge will be obtained, resulting in better advice being provided to clients. This will ultimately improve the relationships financial advisers have with their clients, which may equate to particular benefits in the long-run such as more constant revenue streams and client loyalty.