The examined life: FASEA, facts and the future of advice


The unexamined life

It’s hard to believe that it’s almost 10 years since ASIC advocated the idea of raising training standards for financial advisers.

In 2009, during their Inquiry into Financial Products and Services in Australia the Parliamentary Joint Committee on Corporations and Financial Services noted, at paras 23-24, ASIC’s intention to raise adviser training standards as a key strategy to reduce risks for retail investors.

Despite valiant attempts over the years, ASIC have not materially improved training standards.

ASIC have, however, published Consultation Papers elaborating on their intentions including CP 153 Licensing: Assessment and professional development framework for financial advisers and CP 212 Licensing: Training of financial product advisers – Updates to RG 146.

ASIC’s consultations should not distract us from the fact that we are now on the eve of the implementation of the Corporations Amendment (Professional Standards of Financial Advisers) Act.

This legislation will significantly change the training, education and ethical standards for financial advisers. This changes will require relevant providers (financial advisers providing personal advice to retail clients on more complex products) to

  • hold a degree or higher or equivalent,

  • undertake a professional year,

  • pass an exam,

  • undertake continuous professional development and

  • comply with a Code of Ethics.

The unexamined life is not worth living
— Socrates

The examined life

Let’s focus for a moment on the proposed examination imposed by s 921B(3) of the Corporations Amendment (Professional Standards for Financial Advisers) Act 2017.

From January 2019, new entrants, or former advisers just returning to the industry, must sit the exam before they can commence their Professional Year.

Current financial advisers, people that are registered on ASIC’s Financial Adviser Register prior to 31 December 2018, wont be required to sit the exam before 1 January 2021.

The specifics of the examination recently released by FASEA, merges the curriculum for the examination from 4 to 3 modules and focuses on the following competency areas[2]:

  • Corporations Act (emphasis on Chapter 7 – Financial services and markets) – with an inclusion of other legal obligations such as Anti-Money Laundering, Privacy Act 1988 and Tax Practitioners Board requirements

  • Financial Advice Construction – suitability of advice aligned to different consumer groups, incorporating consumer behaviour and decision making

  • Applied ethical and professional reasoning and communication – incorporating FASEA Code of Ethics and Code Monitoring Bodies.

The 3.5 hour exam will include multiple choice and written response questions and open book for statutory materials.

The format is interesting but the level of the examination may be problematic for some advisers. The questions are designed to test the application of financial adviser knowledge appropriate for candidates at Australian Qualifications Framework (AQF) 7 level of reasoning and not at the Diploma level many advisers have experienced.

For clarity, sitting an exam  set at AQF Level 7 means you are being examined at a level appropriate for a Bachelor Degree.  This is problematic because knowledge, skills, application and volume of study are articulated very differently across the AQF levels.

Exams and exam performance

To highlight the significance of this shift, let’s contrast the knowledge, skills and application of the current Financial Adviser education level of AQF 5 (Diploma) against AQF 7 .

Source: Australian Qualifications Framework Second Edition January 2013

Consider the quantum shift required by the AQF 7 exam  and explain how will an existing adviser, who has not studied nor been examined at a Level 7, perform against these higher standards?

I think advisers have good reasons to be apprehensive. While we’ve insufficient information about either the examination or the provider to be conclusive, international studies present a bleak prospect. In a study conducted in the US on the CFP Certification Examination, Grange et al. found that those who did not have a degree were less than half as likely to pass the exam as persons with a baccalaureate degree or higher.  In a subsequent Australian study on the Certified Financial Planner Program,  Sharon Taylor, Suzanne Wagland and Amanda Taylor found that candidates with with the lowest marks in the exam were those that had not achieved university qualifications.

In the face of these bleak indicators, I’d recommend that you realistically assess your prospects and speak with groups, like Assured Support, that are ready to assist you navigate your way through these significant changes.