New financial advisers will be required to hold a degree, and all advisers will need to sit an exam as part of new amendments passed by Parliament to raise professional and education standards and boost consumer confidence in the industry.
The corporations amendment (professional standards of financial advisers) bill 2016, which passed both houses on Thursday, will bring in compulsory education requirements for new and existing advisers, professional year requirements for new advisers, an exam; and obligations under a code of ethics for all advisers.
The bill requires all new financial advisers to hold a degree, while all existing advisers will need to meet a standard equivalent to a degree, set by the standards body.
It is expected that the “majority” of existing financial advisers will likely receive credit for the education or training that they have already completed and will need only to gap-fill or undertake bridging courses to meet the standard required.
Existing advisers have from 1 January 2019 to 1 January 2024 to meet the new education standards.
All advisers will also need to complete an exam set by the new standards body. New advisers will need to complete the exam from 1 January 2019. Existing advisers will have from this date until 1 January 2021 to pass the exam.
According to the Minister for Revenue and Financial Services, Kelly O’Dwyer, the reforms were necessary as it is “clear that the current framework lacks the incentives to encourage industry to go above and beyond the minimum”.
Speaking at the second reading of the bill, Ms O’Dwyer said: “Under the current law, advisers can become qualified to provide financial advice after just four days of training, and there are no specific ongoing training requirements beyond that.
“The fact that an adviser could reach accreditation in four days has given the industry a bad image.
“That is obviously not good enough and there is clearly room to do better if the industry is to reach its true potential.”
The current main qualification for mortgage broking, the Certificate IV in Finance and Mortgage Broking, requires approximately three days of face-to-face training.
Ms Dwyer added: “The current regulatory framework [is] not enough to build professionalism in the financial advice industry and has not encouraged this industry to take a greater lead in setting standards.
“It is clear that the current framework lacks the incentives to encourage industry to go above and beyond the minimum…
“Raising the professional standards of financial advisers will play a significant role in improving consumer trust in the financial advice industry, which has had repeated instances of inappropriate behaviour.”