3 FASEA issues advisers need to know and 3 to act on now

27th November 2018

Over the past fortnight, the Financial Adviser Standards and Ethics Authority (FASEA) has launched into its next round of consultations with gusto. Draft legislative instruments and policy documents on Continuing Professional Development (CPD), the code of ethics, degree qualifications pathways and the professional year have been released in quick succession.

There will no doubt be a further release in relation to the adviser exam, but in the meantime there are 6 issues worthy of greater consideration by advisers and licensees.

1. Your advanced diploma or designation may count for something

FASEA’s latest guidance on the pathways for advisers to meet their degree qualifications specifically addressed how they will value coursework undertaken to achieve a designation, advanced diplomas and 8-subject diplomas in financial planning.

Designation coursework approved by FASEA will entitle an adviser to as much as 2 subjects’ worth of credit towards their 8-subject graduate diploma. Advanced diplomas and 8-subject diplomas in financial planning require no approval and automatically entitle an adviser to 2 subjects’ worth of credit. If the adviser holds a relevant degree, the credit granted for these examples of prior learning increases to 3 subjects’ worth of credit.

Act now – finish that designation or advanced diploma

This policy of automatically applying credit means many advisers may get value out of completing an advanced diploma or designation course before they commence a graduate diploma in financial planning.

As RG146 does not require a completed diploma or advanced diploma, merely completion of subjects in the areas on which an adviser advises, many advisers have only partially completed their advanced diploma. If an adviser has less subjects to complete to attain their advanced diploma than they would receive credits under FASEA’s policy, finishing the advanced diploma is an option worth considering.

Even if the number of subjects left to complete is the same as the credits applied by FASEA (i.e. 2, or 3 if the adviser has a relevant degree), finishing the advanced diploma should be contemplated. The coursework and assessments that form advanced diploma subjects should, under the Australian Qualifications Framework (AQF) system, be of a less complex nature than those that form graduate diploma subjects.

The same logic applies, by and large, to advisers with incomplete designations. The main difference is that designation coursework needs to be approved by FASEA in order to qualify for course credits. At the time of writing no designation coursework has been approved. That said, an earlier press release from FASEA identified the FPA’s CFP after 2007, and the AFA’s FChFP from 2014, as being examples likely to be approved.

2. Only education providers can apply to have qualifications approved

From FASEA’s draft legislative instrument and policy on approving courses of study, it appears that only education providers can apply to have a domestic qualification approved. This means that advisers with financial planning degrees not on FASEA’s approved list need to go through their education provider in order to have their qualification assessed by FASEA.

From FASEA’s point of view, this approach makes sense. The information they need to assess a qualification should be maintained by the education provider. Furthermore, there are far fewer education providers than advisers so they have a smaller pool of potential applicants.

That said, it is not a very user friendly approach. There is little incentive for education providers to get their old, discontinued qualifications approved by FASEA as it neither burnishes their reputation nor generates any income (unless it will generate significant enrolments in a bridging course program). Advisers would need to lobby their alma maters aggressively to get old degrees assessed, and may still find themselves needing to complete one or more bridging courses to meet FASEA’s standards.

Example – Act now

One omission from FASEA’s draft approved course list is Kaplan’s Graduate Diploma of Financial Planning when commenced from 2014 onwards. Kaplan states on their website that it will ensure the course meets FASEA’s requirements, however advisers need to rely on Kaplan to make the necessary application. There seems to be no FASEA pathway for advisers themselves to address this omission other than asking questions of the education provider.

3. CPD can be tailored to your advice specialisation

Unlike prior guidance around the adviser exam and the degree qualification, FASEA’s policy on CPD appears to give enough latitude to allow advisers to only pursue CPD in their specialist advice areas. FASEA’s policy states:

A responsible Financial Services Licensee is required to support its authorised representatives, employees and relevant providers in their undertaking of continuing professional training to maintain competence at a level appropriate for the professional services (including financial product advice) that the relevant provider provides.

It remains to be seen how FASEA choose to enforce this broad statement however it does appear to allow tailoring for each adviser’s specialisations. This is likely to be an approach welcomed by the industry

4. CPD processes for licensees are about to get much more onerous

FASEA’s latest guidance on CPD requirements places a lot of responsibility on licensees. Ultimately, licensees will be required to:

  1. Approve at least 70% of the CPD undertaken by its advisers and employees.
  2. Create, maintain and adhere to a written CPD policy.
  3. Publish their CPD policy on their website.
  4. Approve advisers’ CPD plans.
  5. Monitor advisers’ CPD progress and ensure they meet their requirements.
  6. Maintain records and evidence of advisers’ CPD completion.
  7. Provide advisers with the necessary resources and facilities to meet their CPD requirements.

Under the current plan, all these requirements must be in place by January 1, 2019.

While some of these functions are already undertaken by licensees, there are a range of new responsibilities, such as creating and publishing a CPD policy and approving CPD activities. For licensees to have these functions in place within 5 weeks seems unlikely. To some degree, such a short turnaround seems an unachievable impost on licensees.

One major factor in the “fee for no service” problems in the advice industry is that licensees were not able to, or did not, put in place robust processes to ensure the requirements of the Future of Financial Advice (FoFA) reforms were met. To give licensees so short of a timeframe to implement such major changes to CPD obligations risks repeating the failures of FoFA.

5. Guilty bystanders still an issue under the code of ethics

The third professional commitment standard of FASEA’s draft legislative instrument on the code of ethics still reads like an enforceable bystander law:

Individually and in cooperation with peers, you must uphold and promote the ethical standards of the profession and hold each other accountable for the protection of the public interest.

In essence, if an adviser sees a colleague, or fellow industry participant, doing something questionable, they are required to report their suspicions to an appropriate authority. If they fail to do so, they may fall foul of their code of ethics and be penalised. The Explanatory Statement does not provide any greater insight as to how this requirement would work in practice and it remains a very wide-ranging provision.

While co-operative behaviours are essential to maintain the integrity of the financial advice industry, compulsory whistleblowing is not conducive to a trusting, professional environment.

6. Act now – get on the Financial Adviser Register (FAR)

The requirements facing new financial advisers from January 1, 2019 are significant. New advisers will need to complete a full professional year, longer tertiary education qualifications and an upfront exam. The barriers to entry are about to grow significantly.

If you have provided financial advice in 2016, 2017 or 2018, you need to make sure you were listed as “active” on ASIC’s Financial Adviser Register (FAR) at some point in this time period. If you fail to do so, you will be considered a new planner from January 1, 2019 and you will not be able to use any of the transitional arrangements available to existing advisers.

It may well be too late at this point, but the massively increased requirements for new advisers should also incentivise practices to bring forward any inexperienced adviser hirings to before January 1. The professional year that new advisers will need to complete from 2019 effectively makes bringing on a new adviser a revenue-free activity for the first year of their employment.

You can still have your say

All the issues discussed above are still subject to open consultations. Now is the time to voice your opinions on these, or any other, issues related to FASEA’s policies on the professional year, qualification pathways, CPD or the code of ethics.

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