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The Financial Planning Association of Australia (FPA) has welcomed the Government’s move to enshrine higher educational and professional standards for financial planners in legislation, but has cautioned some elements are “not workable”
Minister for Small Business and Assistant Treasurer, the Hon Kelly O’Dwyer has released the draft legislation, which is a response to the Government’s Financial Services Inquiry, as part of a round of public consultation before it is considered by Parliament.
Under the proposed changes new financial planners will require a degree, undertake a professional year, pass an exam and together with existing financial planners they will be required to sign up to a code of ethics.
An independent, industry-established body will be created from 1 July next year and will set education standards for existing planners who will be given until 1 July 2019 to complete an appropriate degree equivalent, if they do not already hold one.
FPA CEO Mark Rantall said the draft legislation was a good starting point and he looked forward to consulting further with the Government to improve the details.
“There are elements of the draft legislation that can be amended to better align it with the policy objective of a professional framework. In particular, the FPA is concerned about the proposal to require planners to sign up to a code of ethics, without having to do so as part of a professional body.
“This would create an inherent unworkable conflict for planners as they would be required to follow the code at the same time as sanctioning themselves for any breaches. This change would also not improve on the model we have today.
“The FPA has data that proves financial planners who are not subject to a professional framework through membership of a professional body are 90 times more likely to be involved in ASIC banning and enforcement action,” he added.
Mr Rantall said the FPA was also concerned about the proposed transition period for existing financial planners to meet higher educational standards.
“Giving existing financial planners only two years to complete a degree or equivalent is not workable. The meaning of ‘equivalent qualification’ also needs to be clarified to include professional qualifications such as the CFP® designation. The FPA will be advocating for appropriate recognition of our members who have completed higher levels of training and qualifications than those required by the law.
“We strongly believe there is a unique opportunity for the Government to set the right foundations for the development and growth of an independent financial planning profession that will truly serve and protect the interests of Australian consumers in the next decade and beyond.
“The enshrinement of the term financial adviser/planner will further protect consumers and provide ASIC with the necessary penalty provisions to stop unauthorised individuals from misrepresenting themselves and exploiting consumers.
“The establishment of an independent body to develop and oversee the education framework is welcome and long overdue,” Mr Rantall concluded.