The Australian financial planning industry, facing a mass exodus of planners, has received some rare good news with the federal parliament extending a deadline for advisers to meet more stringent educational requirements.
Parliament in June extended the timeframe for planners to complete now mandatory tertiary education and examination by another 12 months. With an estimated 16,000 advisers yet to sit the exam, the extension is seen likely to slow the exodus from the industry.
New deadline of 1 January 2022
The enhanced professional standards regime arose from revelations of poor practices in the financial services sector. It requires new planners to hold an approved degree before being allowed to practice. Existing planners have until 1 January 2022 to pass the adviser exam and until 2026 to reach the degree standard.
The new regime is being administered by the Financial Standards and Ethics Authority (FASEA). This body was set up by the federal government in 2017 to set education, training and ethical standards for licensed financial advisers in Australia. Previously, planners were allowed to operate with only minimal qualifications.
Torrid time in recent years
The planning industry in Australia has been through a torrid time in recent years, A series of government-commissioned inquiries have uncovered a pattern of misconduct, in which misplaced incentives polluted the quality of advice to consumers and led to poor outcomes.
The most comprehensive report, a Royal Commission led by former High Court Justice Kenneth Hayne, was released in 2019. The federal government has pledged to act on all 76 of Hayne’s recommendations, including strengthening regulatory oversight of the industry.
Facing a rising compliance burden and concerned about brand damage, Australia’s big four retail banks have all now moved to dismantle their vertically integrated businesses. About 80% of advisers were previously aligned with one of the banks or wealth management giant AMP.
The Financial Planning Association of Australia, the industry’s main umbrella body, has welcomed the extension to the deadline for new educational qualifications as a lifeline to an industry already under pressure from the coronavirus crisis.
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