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Requirements for providing Personal Advice to Retail Clients

Financial advisers providing personal advice to retail clients in relation to ‘relevant financial products’ are required to meet the four education and training standards:

Qualification

Complete an approved qualification as listed in the legislative instrument.

Professional Year

Undertake a professional year of work and training that meets the requirements set by the Treasury (new financial advisers only).

Exam

Pass the financial adviser exam as administered by ASIC.

Ongoing CPD

Undertake 40 hours of Continuing Professional Development ("CPD") per year.

Code of Ethics

Comply with the Financial Planners and Advisers Code of Ethics 2019

Note: ‘relevant financial products’ are financial products other than basic banking products, general insurance products, and consumer credit insurance: see section 910A of the Corporations Act 2001.

Qualification

Existing financial advisers (any person who provided personal advice to retail clients between 1 January 2016 and 1 January 2019 and are not banned or disqualified by ASIC) are required to hold a bachelor’s degree or approved equivalent by 1 January 2026. A list of approved tertiary qualifications is available in Schedule 1 of the legislative instrument. Depending on an adviser’s current qualification, they may only be required to complete a bridging course.

New financial advisers are required to either:

Meet the minimum education requirement of an approved Bachelor's degree (AQF7 level), as listed in the legislative instrument, comprising 24 subjects or more.

OR

Where they hold an appropriate qualification, complete an approved graduate diploma (AQF8 level), comprising eight subjects.

AFS licensees must ensure the Financial Advisers Register includes all relevant qualifications held by the financial adviser. Further information is available at the Treasury’s Financial Adviser Standard website.

Professional Year

Since January 2019, all new advisers have been required to undertake a professional year of 1600 hours, including 100 hours of structured training. The professional year must be supervised by an adviser with at least 2 years’ experience working as an adviser. The supervisor is responsible for ensuring appropriate supervision is provided and making various resources and opportunities available to the new adviser.

The professional year is divided into quarters:

Quarter 1

Client Observations and support to Supervisor/Experienced Adviser

Quarter 2

Supervised Client Engagement and Advice Preparation

Quarter 3 and 4

Indirect Supervision of Client Engagement and Advice Preparation

Structured training can include formal study that is undertaken by the new adviser – for instance a bridging course in relation to the Code of Ethics. Other structured training can include:

  • Education for the purposes of achieving a professional designation;
  • Education for the purposes of accreditation in specific forms of financial products; or
  • Education for the purposes of meeting more detailed requirements in specific financial advice provision (e.g. SMSF, stockbroking, aged care etc).

Previously, AFS Licensees were required to notify the Financial Adviser Standards and Ethics Authority within thirty (30) days of a new adviser commencing their professional year. New advisers are no longer required to advise ASIC of their professional year arrangements.

AFS Licensees are still required to notify ASIC if the Licensee grants a new adviser accelerated processions through quarter 1 and 2 or when issuing a final completion certificate of a new adviser’s professional year. Licensees can notify ASIC when appointing a new financial adviser to the Financial Adviser Register via ASIC Connect.

New advisers and their supervisors are required to keep a logbook of work activities and structured training completed over the course of the professional year. Further information is available on the Treasury’s website.

Exam

All new and existing financial advisers must pass an exam. The exam tests three competency areas:

Existing advisers who have made two genuine attempts to pass the exam prior to 1 January 2022 but were unsuccessful, must pass the exam on or prior to 30 September 2022. Further information can be found in ASIC’s Financial Adviser Quick Reference Guide.

New advisers must ensure they pass the exam:

  • After completion of their approved degree; and
  • before starting the 3rd quarter of their professional year. 

ASIC is responsible for administering the exam and will continue to assess the eligibility of new and foreign advisers before sitting the exam. This is completed via the ASIC Regulatory Portal by submitting an “assessment of eligibility to sit exam”. Further information can be found on ASIC’s website. AFS licensees must ensure the Financial Advisers Register is updated upon the financial adviser completing the exam.

Ongoing CPD

Since January 2019, financial advisers have been required to complete 40 hours of CPD per year in order to maintain and extend their knowledge and skills. 70% of these hours must be approved by the AFS licensee. Minimum hours of certain categories are also mandated under the Corporations (Relevant Providers Continuing Professional Development Standard) Determination 2018 (CPD Determination), as outlined below.

Category

Mandated Hours

Purpose

Technical competence

5 hours

Designed to enhance an adviser’s technical proficiency and ability to develop and provide advice strategies that are appropriate to the objectives, financial situations and needs of various retail clients

Client Care and Practice

5 hours

Designed to enhance an adviser’s ability to act as a client-centric practitioner

Regulatory Compliance and Consumer Protection

5 hours

Designed to enhance an adviser’s understanding of applicable legal obligations and how to comply with them

Professionalism and Ethics

9 hours

Designed to enhance an adviser’s capacity to act as an ethical professional

Qualified tax providers must also complete an additional 5 CPD hours per year to maintain their capabilities to provide tax (financial) advice services.

The CPD Determination also requires advisers to maintain appropriate records of the training they have completed, as directed by their AFS licensee. 

Code of Ethics

The Financial Planners and Advisers Code of Ethics 2019 was developed to ensure higher standards of behaviour and professionalism and includes 12 ethical standards for advisers to meet, including:

  • acting:
    • in accordance with applicable laws;
    • in the best interests of the client;
    • with integrity; 
    • with competence and in good faith; 
  • refraining to act where the adviser has a conflict of interest;
  • ensuring the client understands the advice, benefits, costs and risks of the various products recommended by the adviser;
  • obtaining client’s informed consent to all benefits received by the adviser or their licensee in connection with the advice;
  • record keeping; and
  • cooperation with peers and promotion of ethical standards.

Steps towards compliance

In order to ensure compliance with the regime, all AFS licensees that 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 overall compliance frameworks in light of the Financial Planners and Advisers Code of Ethics 2019
  • Review the CPD plans in place for all advisers to ensure that the mandatory categories and applicable hours are met;
  • where new advisers are being appointed, ensure appropriate steps are undertaken to:
    • appoint a supervisor;
    • make appropriate resources and opportunities available; and
    • ensure records are kept.
  • Consider which staff are appointed to supervise new financial advisers and ensure they understand their obligations;

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 professional standards regime.  

Background

In 2017, the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 introduced a range of reforms in relation to the education, training and ethical standards of financial advisers. Since 1 January 2019, the professional standards and training obligations have applied to financial advisers who provide personal advice to retail clients.

In 2021, the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021 transferred the oversight and implementation of functions relating to the reforms to the Minister and ASIC.

Further Reading

Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2021
ASIC Guidance on qualification, exam and professional development
ASIC Guidance on eligibility to sit exam
ASIC Guidance on professional year arrangements for new advisors, licensees and foreign advisors

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