Call for higher standards

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Higher competency standards for financial advisers are among the recommendations of Australia’s Financial System Inquiry.

Tuesday, December 9th 2014, 6:00AM 1 Comment

by Susan Edmunds

The inquiry, which delivered its final report on Sunday, is intended to establish a direction for the future of Australia’s financial system.

It says the Government should continue the current process to raise the minimum competency standards for financial advisers.

It said the minimum standards for those advising on Tier 1 products  - personalised advice - should include a relevant tertiary degree, competence in specialised areas and ongoing professional development.

It said minimum training standards that were too low given the complexity of many financial products affected confidence and trust in the sector.

The inquiry also called for a register of advisers.

It acknowledged the requirement for higher education standards might cause some advisers to leave the industry and deter some from entering, potentially causing an “advice gap” but suggested transitional arrangements could help. 

Association of Superannuation Funds of Australia chief executive Pauline Vamos said: “More and more, when we look at the regime around advice, how it’s delivered and how we can ensure that consumers are brought along the journey will be very, very important.  Receiving a 100-page Statement of Advice that maps out your financial life is often not the best way to go for people.  They need to be coached through their financial decision making.  As we lift our standards and as we professionalise the industry, we will find we have an industry that generates new advisers coming through with a range of different levels of qualifications that provide the depth and breadth of advice that is required.”

She said a large cross section of financial advisers had not been tertiary educated because they had been in the industry a long time.

“What we are talking about are minimum standards to entry.  There needs to be a way that we can recognise existing, qualified advisers, but this is about raising the standards and qualifications over the next few years.”

It comes after the regulator, ASIC, said the state of financial planning in Australia was “absolutely appalling”.

Australian Securities and Investments Commission chairman Greg Medcraft, speaking at the National Press Club, said witnessing the actions of financial planners had “absolutely broken my heart”.

Medcraft said the financial planning sector had repeatedly ignored pressure from ASIC to lift its standard.

Allan Rickerby, who offers advice on both sides of the Tasman, said financial planners in Australia had been “beaten up”. “But there have been absolute rogues out there… we get thrown into that category.”

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