The Financial Adviser Standards and Ethics Authority (FASEA) has gone back and forth in its position on providing leniency to advisers in meeting their Continuing Professional Development (CPD) requirements in this, COVID-19 affected, year.
In this month’s Industry Insights, we look at FASEA’s position on CPD in this unprecedented year, and examine whether its proposed solution provides much in the way of assistance to advisers.
The background
In March, FASEA initially declined to allow advisers any leeway when it came to meeting their CPD obligations. This was in spite of the fact the Tax Practitioner’s Board (TPB), who also dictate ongoing training requirements for advisers (read more on that overlap here), had temporarily lifted the CPE reading cap to allow more professional reading to be included as CPE.
In an environment where professionals are less able to attend in-person sessions, it makes sense that they be given leeway in either the time they have to complete their CPD, or the manner by which they can complete it.
In July, FASEA ultimately registered a legislative instrument that provides advisers a 3-month extension. This extension, however, is not without caveats, and may results in unwary planners kicking the CPD can down the road without realising it.
The 3-month extension
For CPD years that include March 18, 2020, FASEA is allowing CPD activities completed in the 3 months after the normal end of the CPD year to be counted in the year. This effectively gives the financial adviser 15 months in which to satisfy their CPD requirements.
Example
Brenda has a CPD year that ends on May 31. Brenda’s “COVID” year is the CPD year running from June 1, 2019 to May 31, 2020.
Brenda only completes 25 hours of CPD in her “COVID” CPD year. As such, she uses the extension to complete another 15 hours of CPD before August 31, 2020.
The catch
Unfortunately, the extension is not as generous as it first appears. The extension does not reset an adviser’s CPD year start date to a date 3-months further along in the year.
Instead, it provides a 3-month window at the start of the following CPD year in which the adviser can apply CPD hours to the year just gone, or the current year. Importantly, CPD hours can only be counted towards one year, not both.
Example
Brenda has a CPD year that ends on May 31. Brenda’s “COVID” year is the CPD year running from June 1, 2019 to May 31, 2020.
For the first 3-months of Brenda’s next CPD year, June 1 to August 31, 2020, she can choose to apply any CPD hours she completes to her “COVID” year, or the year in which they are completed. That said, she can only apply hours to one of the other. One hour cannot count towards both.
Using the extension, kicking the can
Any adviser who uses the 3-month extension will find themselves having to dramatically increase their CPD activities in the year following their “COVID” CPD year. Instead of completing their usual CPD workload (commonly 40 hours per annum), they will need to complete their usual workload plus the amount they counted towards their “COVID” CPD year.
Example
Brenda has a CPD year that ends on May 31. Brenda’s “COVID” year is the CPD year running from June 1, 2019 to May 31, 2020.
Brenda only completes 25 hours of CPD in her “COVID” year. As such, she uses the extension to complete another 15 hours of CPD before August 31, 2020.
In doing so, Brenda now only has 9 months in which she can complete the 40 hours she must complete for the CPD year ending May 31, 2021. In effect, she will need to complete 55 hours in the year to make up for the shortfall in her “COVID” year.
The outcome
What results from FASEA’s temporary CPD rule amendment is a Clayton’s dispensation – the dispensation you get when there is no dispensation. An adviser can choose to wait longer to complete their CPD for the “COVID” year, but all that will eventuate is a mad scramble to jam as much CPD into the following year as possible.
Ultimately, this partially-executed averaging of CPD over two CPD years is a baffling approach by FASEA when the TPB had already modelled a much more practical solution.
Furthermore, the concept of longer TPD periods (such as a “triennium”, as was previously overseen by the FPA) had already been rejected by FASEA when the CPD standard was created in 2018. FASEA concluded one-year CPD periods to be best for the profession, despite the fact that longer CPD periods clearly cater better for situations where CPD becomes temporarily hard to complete. Not to mention that many other professions and regulators (notably accounting and the TPB) employ trienniums for this very reason.
What should advisers do?
Ultimately the best approach is for each adviser to complete CPD in a manner that suits their personality and practice. There is more than enough online content available (including on wealthdigital) for advisers to meet their CPD requirements during their normal CPD years and not rely on FASEA’s extension.
If, however, the pressures of working from home, managing kids and, in some cases, dealing with lockdowns, makes this a particularly tough year for CPD, the extension is there. Just keep in mind that the following CPD year will be a much more onerous one than normal.
