Are you offering financial advice? You might need to hit the books, again

The Financial Adviser Standards and Ethics Authority (FASEA) is responsible for setting the educational standards that practitioners in fields relating to financial advice are required to meet. Are you offering financial advice to clients? The standards also apply to accountants who provide advice, whether as an employee or authorised representative of a full or limited Australian Financial Services Licence (AFSL) holder.

Earlier in March this year, FASEA released guidance on “degree equivalence” standards to apply to advisers which, on a positive note for those in the accounting profession offering financial advice, indicates that those with a degree in a “related field” meet this part of the suite of new standards to apply — that is, qualifications in accounting, financial planning or advice, business, commerce, law or economics (download the FASEA paper from here).

However FASEA may have thrown something of a spanner in the works by proposing that the above graduates will need to complete a bridging course of three units to be able to continue to offer financial advice. The three units include studies in the Corporations Act (with an emphasis on chapter 7), the FASEA code of ethics, and Behavioural Finance.

Post-graduates will be required to undertake a single subject, covering the code of ethics. This requirement to undertake this single unit of study is an addition to the December 2017 proposal from FASEA (the earlier document is here).

The good news about the latest FASEA release is that it provides much more guidance than the initial release from December 2017 on what advisers are required to cover to comply. Also changed from the previous FASEA proposal is a condition that any qualification that was more than 10 years old would be disregarded. Now the timeliness requirement has been eliminated.

Liam Shorte is the director of SMSF specialist advisory firm Verante, and says that he is relieved that they have chosen to recognise related degrees and not limit recognition to those acquired in the last 10 years. “The outcome that only three bridging units are required rather than the eight units in a normal graduate diploma is a relief in terms of time required to complete the studies, and the costs involved,” he says.

The bottom line is that most advisers will need to complete other pieces of education under the new requirements. The minimum an adviser will have to do is a single unit of study which is at AQF8 level and 120 hours (typically one semester of study).

An SMSF service provider and consultant in Adelaide says this can take a very long time for someone who is working full-time and/or has a family with young kids to look after. “Plus, there are older advisers who haven’t studied for years,” she says. “This is going to have a massive impact on their lifestyle, so there is no question this is going to be a long and painful road for some.”

Verante’s Liam Shorte says at least there is now some clarity. “The good thing is that now we have some certainty on what will be required and we can now look to plan for the future. The original proposal to only provide the pathways in late 2018 left people feeling vulnerable and caused ire, as this is an issue that affects how we make our income and provide for our families.”

The reforms to advisory standards are also seen by many as a long-overdue catch-up to financial advice standards that the government was meant to have carried out many years ago.

In another blow for accountants already offering financial advice, FASEA has indicated that while some may be eligible for exemptions via “recognition of prior learning” (RPL) options, it does not intend to allow RPL in the bridging course programs. It has however left the door open on changing this in the future.

The legislation to amend the educational standards can be read in full here.

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