The Association of Financial Advisers (AFA) has said that the benefits of major reform to education standards for financial advisers can be obtained without the likely negative consequences that the current proposals could generate.
In a paper on “Education Standards for Existing Advisers”, the AFA calls for experienced advisers over 55 to be subject to more lenient requirements. It says, ”We do not believe that the solution for minimum education standards for existing advisers should be on the basis that they need to start from scratch. We do not support the need for a Graduate Diploma as this understates the value of experience and will result in unnecessary widespread industry disruption.”
In April 2018, the AFA conducted a survey of its members that shows a few key points, namely:
- 54% of advisers do not have a degree.
- 69% of advisers with over 20 years experience, do not have a degree.
- These older more experienced advisers are more likely to be business owners.
- 70% of advisers have chosen to do further study including having completed the Advanced Diploma of Financial Planning or the older eight unit Diploma of Financial Planning. Many advisers have also chosen to do a professional designation to improve their education.
- Over 16% of advisers have indicated an intention to retire as a result of these reforms and over 22% are still undecided on whether to remain in the profession. 60% of experienced advisers (20 plus years) have indicated that they either intend to retire or are not yet decided on whether to continue.
The AFA calls for a provision whereby advisers with at least 15 years' experience who are aged 55 or over as at 31 December 2023, need only complete a graduate certificate comprising four subjects by the same date. However, this would be subject to a sunset date for capacity to practice until 31 December 2029. It also suggests the experience requirement to qualify for this option be extended from 10 years to 15 years.
For advisers with qualifications in a related field, the AFA has recommended expanding the definition of related degrees to include any undergraduate or postgraduate degree that includes at least six subjects in accounting, finance, financial planning, economics, law or tax. The AFA also believes mathematics, actuarial studies and psychology degrees should be included as related fields.
The AFA would also like to see an extension of the deadline to achieve degree equivalence till 31 December 2024, from the original deadline of 1 January 2024.
Likewise, extending the deadline for existing advisers to complete the registration exam from 31 December 2020 to 31 December 2022 would allow advisers to benefit from study completed in achieving degree equivalence, the AFA says.
The AFA warns that up to 45% of its 4,400-strong membership may exit the industry if the education requirements are unchanged.