Adviser education pathways and Code of Ethics

Smart practice

Monday 23 April 2018

Legislation was passed by Parliament on 09 February 2017 that aims to raise the education, training and ethical standards of financial advisers who provide personal advice to retail clients.

The key aspects of the new requirements are outlined in the table below.

RequirementStart date for new advisers (authorised on or after 1 January 2019)Start date for existing advisers (authorised between 1 January 2016 and 1 January 2019)
Have a relevant bachelor or higher degree, or equivalent qualification 1 January 2019 1 January 2024
Pass the exam 1 January 2019 1 January 2021
Complete a professional year 1 January 2019 Not applicable
Comply with CPD requirements 1 January 2019 1 January 2019
Comply with the code of ethics 1 January 2020 1 January 2020
Be covered by a compliance scheme 1 January 2020
(Compliance scheme notifications to be received from 15 November 2019)
1 January 2020
(Compliance scheme notifications to be received from 15 November 2019)

Source: ASIC: Professional standards for financial advisers - reforms


The newly established Financial Adviser Standards and Ethics Authority (FASEA) is tasked to set the standards for the educational and training requirement, develop the industry exam and create a code of ethics for the industry.

To date, FASEA has released proposed guidance on education pathways, including degree equivalence for existing financial advisers, as well as a draft code of ethics. These are the focus of this article.


Education pathways

FASEA’s proposed guidance includes the educational pathways available to new and existing advisers to meet the new requirements. Existing advisers, generally those listed on ASIC’s Financial advisers register prior to 1 January 2019, have until 1 January 2024 to meet the following requirements:

Existing adviser with:Education pathwayCourse compositionStudy time
No degree Approved Graduate Diploma or approved qualifications (degree or master) which will take 3–6 years of part-time study 8 subjects at AQF8 2 years part time
Unrelated degree Approved Graduate Diploma 8 subjects at AQF8 2 years part time
Related degree* Bridging course 3 subjects at AQF8 <1 year part time
Related degree + related post graduate qualification Bridging course 1 subject on FASEA Code of Ethics Approx 2 months part time

*A related degree includes a major/specialisation in accounting, financial planning/advice/services, finance, tax, law or economics.


Although existing advisers either without a degree or with an unrelated degree must complete an eight subject approved graduate diploma, those who have completed certain educational programs and/or professional designations (e.g. Certified Financial Planner (CFP) and Fellow Chartered Financial Practitioner (FChFP)) may be eligible for subject exemptions via recognition of prior learning (RPL). Exemptions will be assessed by the individual education providers.

An ‘approved degree’ will be approved by FASEA. The only currently approved qualifications are those approved by the Financial Planning Education Council.


Code of Ethics

While most of the recent industry focus has been on the education pathways, there will be other compulsory requirements for advisers, including abiding by the FASEA Code of Ethics. Key points regarding the draft Code of Ethics include:

  • all advisers (existing and new advisers) will be required to comply with the Code of Ethics from 1 January 2020
  • the Code must be monitored and enforced by one or more external monitoring bodies (i.e. cannot be an AFS licensee or an associate of a licensee), under a compliance scheme approved by ASIC
  • licensees must notify ASIC of their selected code monitoring body by 15 November 2019.

One challenge for licensees will be the selection of a code monitor body – currently there are very few independent bodies that have the resources and expertise necessary to carry out the required monitoring and enforcement activities. Professional associations like the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) are likely to be code monitoring service providers.

The FASEA draft Code of Ethics adopts a principles-based approach, outlining a set of principles and core values. In particular, it comprises 12 standards as listed below.

AreaStandards
Ethical behaviour Standard 1: Act in accordance with the spirit – and not only the letter – of all relevant laws and regulations.
Standard 2: Must neither advise, refer, nor act in any other manner, where inappropriate personal advantage is derived by the relevant provider.
Standard 3: Act with personal integrity and as an independently minded professional, for the benefit of each client.
Client care Standard 4: Act only on the basis of the free, prior and informed consent of a client.
Standard 5: Ensure that all advice and products are:
  • in the best interest of each client
  • appropriate to the individual circumstances of each client
  • presented in terms easily understood by the client.
Standard 6: Take into account the broad effects arising from a client acting on their advice.
Quality process Standard 7: Obtain informed consent to act and to receive agreed fees and payments for agreed services.
Standard 8: Obtain informed consent, and agree, to maintain records relevant to the advice provided, in accordance with relevant privacy, regulatory and confidentiality obligations.
Standard 9: Ensure that all advice and products are:
  • offered in good faith and with competence
  • based on information that is neither misleading nor deceptive.
Professional commitment Standard 10: Develop and maintain a high level of relevant knowledge and skills.
Standard 11: Accept that potential breaches of this Code will be subject to investigation and discipline from the responsible Code Monitoring Body, undertaken in accordance with ASIC’s approval and oversight of that Body.
Standard 12: Individually and in cooperation with peers, uphold and promote the ethical standards of the profession, and hold each other accountable for the protection of the public interest.

ASIC will consult on the criteria for approving a compliance scheme later in the year.


Further information

FASEA: FASEA releases, resources and consultations

ASIC: Professional standards for financial advisers - reforms

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