“I am, as I’ve said, merely competent. But in an age of incompetence, that makes me extraordinary.”
— Billy Joel
The (enduring) legacy of RG146
7,087 redundant words and yet RG 146 is still being relied upon to evidence the competence of those people responsible for our Australian Financial Services Licences (AFSLs).
Your Responsible Managers (RMs) are those people in your business, responsible not only for your licence but also for the quality of your financial services. These people have the appropriate knowledge and skills to demonstrate the licensee has the competence to provide financial services efficiently, honestly and fairly.
It is interesting that RMs are still able to demonstrate appropriate knowledge by relying on RG 146 and short industry courses, rather than an approved degree; pass an examination; complete a course in ethics and maintain 40 hours of CPD.
We find ourselves in an interesting situation where we have a misstep between the competency required of a Licensee’s Responsible Manager(s) and that of their representatives.
Additionally, competence can be maintained at a level well below the CPD obligations our representatives are required to maintain year on year.
Consultations and actions
“Happy talk, keep talkin’ happy talk,
Talk about things you’d like to do.
You got to have a dream,
If you don’t have a dream
How you gonna have a dream come true?”
— Rodgers and Hammerstein’s South Pacific
ASIC did attempt to consult on this issue on 8 November 2018, through Consultation Paper 305 Organisational Competence requirements for advice licensees: Update to RG 105 and proposed:
- Adding to the existing options in RG 105 for demonstrating the knowledge and skills of responsible managers by introducing a new ‘option 6’, which would reflect the higher education and training standards for financial advisers; and
- Requiring advice licensees to have at least one responsible manager who would satisfy option 6.
Read Draft RG105
However, consulting is the easy part.
Since 2018, we have not seen a progression of CP 305 and we find ourselves in a perverse situation where RMs prove competence at a standard well below the representatives authorised under the licence.
Should we invoke section 109 of the Australian Constitution to resolve this contradiction and deal with this clash of laws.
Sadly, we can not as s109 deals with legislative inconsistency between federal and state laws only.
In fact, there seems to be little interest in doing so.
It’s 2021 and well over a year since we described RG 146 as “mostly dead” the little critter still endures.
As well as being relied upon to evidence initial and ongoing competence for Responsible Managers, the redundant RG146 is also being relied on by:
- Advisers providing general advice on: Tier 1 products and Tier 2 products other than basic deposit products and related non-cash payment products and basic deposit products and related non-cash payment products;
- Customer services representatives providing financial product advice in the course of their work; and
- people who provide general advice, personal advice on basic banking products, general insurance and/or consumer credit insurance and individuals who provide financial product advice in relation to a time-sharing scheme.
We understand the appeal of tradition, and financial services is overwhelmed by legacies, but moving towards professionalism requires higher standards and clearer requirements.
Let’s hope those, at least, are achievable.