The financial advice industry is divided on what qualifications mean, and for some it seems even experience isn’t enough.
Advisor numbers are already down and fees are rising, so it’s bad timing for the sector and risks depriving more potential clients of advice.
Credentials have plagued the industry since Hain’s investigation came to light in 2018.
The coalition has led a major move to reform the criteria that rest on the new exam, which all advisers must pass or quit from the field.
Now the Albanon Labor government has revisited the issue and suggested that qualifications are not everything. The advisor’s industry hours should also be considered.
Financial Services Minister Stephen Jones wants to include an ‘experience track’. A new government push included in a recent bill is that his ten years in business should equate by itself to “passing” an exam.
I wish it was so easy. The first problem is that thousands of advisors have already taken the time to pass the new exams, and many operate on the assumption that they will be expelled if they fail. .
The second problem is that we don’t know what the advice department wants. A newly merged trade body, the Financial Advice Association Australia (represented by the former Financial Planners Association and the Financial Advice Association), conducted a survey on eligibility issues and its members moved in two very different directions.
A minority of 51.9% supported the addition of so-called “experience routes,” while 49.1% opposed it.
Former FPA chief executive Sarah Abboud, who is now head of the newly formed FAAA, said, “This is a significant split and shows that more changes are needed.”
Aboud said two amendments would be enough to get 70 percent approval from the membership base.
They are asking for a 10-year sunset clause to allow advisors to “continue” using the empirical pathway. But it is only a transitional arrangement, meaning that while the current unqualified middle-aged advisors will continue, the advisors that will follow in the next few years will not.
Separately, the ‘experiential pathway’ cohort must take ethics credits.
On the other hand, the overall provision of financial advice services is inadequate. In recent years, the total number of Australian financial advisors has plummeted from about 30,000 to less than 15,000, accelerated by the withdrawal of large banks from middle-income wealth management.
So far this year, the advice industry has added just 45 advisors, according to Wealth Data.
In February, attorney Michelle Levy submitted a substantive report for an overhaul of the financial advice industry, but the government has yet to act on her recommendations.
In the meantime, even opportunities to meet with experts have decreased. Currently, the median annual fee is $3,700, and disagreements within the industry over how to prove credentials are of no avail.