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New Professional Standards and Training Obligations for Financial Advisers are Coming Soon

Posted on March 28th, 2018 by Sophie Gerber in AFSLs

From 1 January 2019, all new financial advisers will be required to meet 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) will also be 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 2024.

Steps Towards Compliance

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

  1. review existing financial advisers’ qualifications to identify any need to complete additional courses to meet the new education requirements by 1 January 2024;
  2. review existing Training Policies and/or HR Policies regarding ongoing professional training and supervision of financial advisers;
  3. work with existing financial advisers regarding pathways to upgrade existing qualifications. After 1 January 2024, financial advisers without an appropriate qualification will be required to cease working as a financial adviser;
  4. review existing Training Plans for each financial adviser to ensure they are prepared to take the industry exam by the relevant deadlines;
  5. review overall compliance frameworks in light of the Act as well as the new code of ethics; and
  6. where new advisers are being appointed, ensure all financial advisers will comply with the new requirements by 1 January 2019.

Summary of the New Regime

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

New RequirementExisiting Financial AdvisersNew Financial Advisers
All financial advisers must possess a bachelor’s degree, or approved tertiary qualification. Must comply by 1 January 2024Must comply by 1 January 2019
All financial advisers must pass a benchmarking exam. Must pass the exam by 1 January 2021Must comply by 1 January 2019
All new financial advisers must undertake at least 1 year of professional work experience, which meets the requirements set by the FASEA. N/ACommences on 1 January 2019
All financial advisers must meet minimum requirements for CPD as set by the FASEA.Commences on 1 January 2019Commences on 1 January 2019
Code of EthicsCommences on 1 January 2020Commences on 1 January 2019

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 Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 came into effect, imposing new 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 its proposed guidance in relation to Existing Adviser Qualification Pathways to ensure compliance with the new training and educational standards. Under the proposed 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 2024, an approved tertiary level qualification; or
  3. having completed, by 1 January 2024, 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 joint FASEA and Financial Planning Education Council (FPEC) approved training register. (Note: as at the date of this blog, the FASEA/FPEC training register has not been published).

A consultation period is set to be opened early this year and run until approximately June 2018. FASEA is particularly interested in seeking feedback from current financial advisers in relation to the application of the proposed guidance on existing advisers and their ability to meet the 1 January 20124 deadline.

See view a copy of the full proposed guidance, visit the FASEA website.

ASIC has developed a new 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.

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.