Legislation has been introduced into Parliament to mandate professional standards for financial advisers.
The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 includes:
- Compulsory education requirements for both new and existing financial advisers
- Supervision requirements for new advisers
- A code of ethics for the industry
- An exam that will represent a common benchmark across the industry
- An ongoing professional development component.
Currently, guidance from the Australian Securities and Investments Commission sets out the minimum knowledge, skills and education standards for financial advisers.
Both the Financial System Inquiry and the Parliamentary Joint Committee raised concerns with the current standards, and questioned whether they were appropriate to ensure advisers were professionally competent.
“The current requirements have allowed some financial advisers to become qualified to provide financial advice to retail consumers after only four days of training,” Minister for Revenue and Financial Services Kelly O’Dwyer says.
“There is also no specific requirement currently for advisers to undertake continuous professional development.
“The government’s reforms will significantly increase the education, training and ethical standards of financial advisers, who will need to be qualified to a standard equivalent to a degree.”
The new professional standards regime will commence on January 1, 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 January 1, 2021, to pass the exam, and five years, until January 1, 2024, to meet the education requirements. The transition period recognises that existing advisers may need to complete the education requirements on a part-time basis, while continuing to service their existing clients.
The government is set to establish an independent standards body, as a Commonwealth company, to administer the regime. From the date of establishment until the regime commences, the body will be responsible for developing and setting the industry exam, developing the code of ethics, and setting the education requirements, including working with education providers to establish appropriate courses. The body will develop the exam, the code and the standards in accordance with international best practice and will consult broadly with stakeholders throughout the process. It will be funded by the industry.
“These reforms will deliver significant benefits to consumers by building trust and confidence in the financial advice industry, by ensuring that people have access to financial advisers who will put their interests first, and who are professionally competent and ethical,” O’Dwyer says.