Are you on track to meet the New Professional Standards and Training Obligations for Financial Advisers?

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From 1 January 2019, all new financial advisers were required to commence meeting the new professional standards and training obligations.

Under the new regime, financial advisers providing personal advice to retail clients are required to:

  • hold an approved tertiary level qualification;
  • undertake a year of professional work experience;
  • pass an exam;
  • undertake Continuing Professional Development (CPD); and
  • comply with a code of ethics.

Existing financial advisers (any person who provided personal advice to retail clients between 1 January 2016 and 1 January 2019 and is not banned or disqualified by ASIC) are also required to meet the new education and training standards as established by the Financial Adviser Standards and Ethics Authority (FASEA); namely, having completed a tertiary level qualification that has been approved by FASEA or an appropriate bridging course by 1 January 2026.

Steps towards Compliance

In order to ensure compliance with the new regime, all AFS licensees which provide personal advice to retail clients should:

  • review existing financial advisers’ qualifications to identify any need to complete additional courses to meet the new education requirements by 1 January 2026;
  • review existing Training Policies and/or HR Policies regarding ongoing professional training and supervision of financial advisers;
  • work with existing financial advisers regarding pathways to upgrade existing qualifications. After 1 January 2026, financial advisers without an appropriate qualification will be required to cease working as a financial adviser;
  • review existing Training Plans for each financial adviser to ensure they are prepared to take the industry exam by the relevant deadlines;
  • review overall compliance frameworks in light of the Act as well as the new code of ethics; and
  • where new advisers are being appointed, ensure all financial advisers comply with the requirements that came into effect on 1 January 2019. 

Summary of the New Regime

The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 (the Act) introduced a series of changes relevant to advisers who provide personal advice to retail clients. These changes are summarised in the table below:

NEW REQUIREMENTExisting Financial AdvisersNew Financial Advisers
All financial advisers must possess a bachelor’s degree, or approved tertiary qualification. Must comply by 1 January 2026Commenced on 1 January 2019
All financial advisers must pass a benchmarking exam. N/ACommenced on 1 January 2019
All financial advisers must meet minimum requirements for CPD as set by the FASEA.Commenced on 1 January 2019Commenced on 1 January 2019
Code of Ethics. Commenced on 1 January 2020Commenced on 1 January 2020

It is worthwhile noting that as at the date of this blog the Australian Securities and Investments Commission has not yet updated its Regulatory Guide 146: Training of financial product advisers.

Background

On 15 March 2017, the Act came into effect, imposing professional, ethical and education standards on all financial advisers providing personal advice to retail clients.

The Act empowered the Government to establish an independent standards body, FASEA which has broad powers in relation to setting the education, training and ethical standards of financial advisers. FASEA is funded by the financial services industry.

FASEA has released guidance in relation to Existing Adviser Qualification Pathways to ensure compliance with the training and educational standards. Under the guidance existing financial advisers can meet the new standards by:

  1. having already satisfied the educational standard requirement by holding an approved qualification; or
  2. having completed, by 1 January 2026, an approved tertiary level qualification; or
  3. having completed, by 1 January 2026, a course that offers at least eight (8) units or courses (i.e. an approved bridging course) that covers:
    • ethics, professional attitudes and behaviours;
    • financial planning and the financial advice process; and
    • technical requirements.

Approved qualifications are listed on the FASEA Approved List.

ASIC has developed a page on their website which includes information on the new professional standards for financial advisers and how best to navigate them.

The website provides an overview of the new requirements, as well as related information on:

  • the scope of the reforms
  • the obligations on advisers
  • the commencement dates of the reforms
  • the Financial Adviser Standards and Ethics Authority
  • compliance schemes for the Code of Ethics, and
  • updates to the Financial Advisers Register.

ASIC hopes this information will help financial advisers, and those coming into the advice industry, prepare for the new requirements. Further information can be found on the new page of the ASIC website.

Sophie Grace can assist you with implementing plans to comply with the new regime, as well as developing a compliance framework which captures the key components of the Act.  

Should you require any further information or assistance, please contact us.

About The Author

Melody Gao

Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.

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