Currently, the Australian Securities and Investment Commission (ASIC) guidance sets out the minimum knowledge, skills and education standards for financial advisors. Both the Financial System Inquiry and the Parliamentary Joint Committee raised concerns with the current standards, and have questioned whether they were appropriate to ensure that advisors were professionally competent.
The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 includes:
- Compulsory education requirements for both new and existing financial advisors;
- Supervision requirements for new advisors;
- A code of ethics for the industry;
- An exam that will represent a common benchmark across the industry; and
- An ongoing professional development component
“The current requirements have allowed some advisors to be qualified to provide financial advice to retail consumers after only four days of training,” Minister O’Dwyer said, “The Government’s reforms will significantly increase the education, training and ethical standards of financial advisers, who will need to be qualified to the standard equivalent to a degree.”
The new professional standards regime will commence on 1 January 2019. From this date, new advisers entering the industry will be required to hold a relevant degree. Existing financial advisers will have access to transitional arrangements, allowing them two years, until 1 January 2021, to pass the exam, and five years, until 1 January 2024, to meet the education requirements.
The Australian Banker’s Association (ABA) Executive Director of Retail Policy, Diana Tate said, “We welcome the introduction of the Federal Government’s professional standards legislation in Parliament today. Many Australian’s rely on financial advice to help them get the most out of their money, whether they’re building up wealth, or throughout retirement.”
“The new higher minimum entry and education qualifications, better continuing professional development requirements and a mandatory code of ethics for financial advisers will help ensure consumers receive high quality advice that is in their best interests,” she continued.
The ABA are not the only company welcoming the introduction of these laws. The Self-Managed Superfund (SMSF) Association has also welcomed today’s introduction of the legislation, and hope it will lift the education and ethical standards of their financial advisors.
Andrea Slattery, Managing Director/CEO of the SMSF Association says that the new legislation establishes a framework that will raise the educational and ethical standards through a co-regulatory approach, which will allow the industry to take responsibility for its professionalism.
“It is important to stress, however, that advisors should not sit back and wait for the Government’s deadlines to undertake further education to improve their competencies. It is each advisor’s own professional duty to keep improving their knowledge and qualifications to deliver high quality advice to their clients,” she said.