Adviser Professional Standards for New Entrants

Thursday 07 March 2019

Anyone wishing to become a Financial Adviser from 1 January 2019 needs to meet the new requirements of the Adviser Professional Standards laws.

These laws commenced on 1 January 2019 and are intended to raise the education, training and ethical standards of Financial Advisers. Those who give personal advice to retail clients on financial products1 must hold a degree, pass an exam, meet Continuing Professional Development (CPD) requirements and comply with a Code of Ethics. New advisers who enter the profession from 1 January 2019 (or those who otherwise don’t meet the transitional rule requirements) will also need to undertake a Professional Year, a year of workplace training and other activities intended to develop professional competence.

For simplicity, we use the term ‘Adviser’ to refer to those who are subject to the standards.

This article follows on from last month’s article on the rules for Existing Advisers.2 Here we focus on the new standards for Approved degrees and the Professional Year as they apply to New Entrants. “New Entrant” is the term used by the Financial Adviser Standards and Ethics Authority (FASEA) to refer to someone entering the profession who does not qualify for the transitional rules available to Existing Advisers.

When do New Entrants have to meet the new standards?

Before being authorised to give personal advice to retail clients on financial products,1 New Entrants must:

  • complete a FASEA Approved degree (explained below)
  • complete a Professional Year (explained below), and
  • successfully pass the FASEA Exam (explained in our earlier article).

Sequence of key milestones

The diagram below provides an overview of the anticipated sequence of key milestones for a New Entrant.

A FASEA Approved degree will need to be completed before a New Entrant can sit the Exam. The individual will need to pass the Exam before Quarter 3 of the Professional Year can commence.

During a New Entrant’s Professional Year and after they have completed a FASEA Approved degree and passed the Exam, they may be referred to as a Provisional Financial Adviser or a Provisional Financial Planner and registered on ASIC’s Financial Adviser Register (FAR) on this basis. From this time, the Code of Ethics will apply.3

Following successful completion of the Professional Year, the New Entrant can be authorised to give personal advice in their own right and registered as a Financial Adviser on the FAR. From this time, the CPD requirements will apply.4

Apart from the timeframes, the Exam, Code of Ethics and CPD requirements are the same for all Advisers (new and existing). These elements are covered in our previous article.

The key differences between the requirements for New Entrants and those for Existing Advisers relate to the Approved degree requirements and the Professional Year (which applies to New Entrants only). We have expanded on these below.

Approved degree requirements

The FASEA Education Pathways set out the range of courses that both Existing Advisers and New Entrants will need to undertake to meet the new standard. For New Entrants there are two separate pathways:

  • Undergraduate - a FASEA Approved 24-unit bachelor's degree
  • Postgraduate - a FASEA Approved graduate diploma or master's degree

Approved degree

Several degrees from a range of education providers have been approved by FASEA for New Entrants.5 These cover bachelor's and postgraduate degrees, generally with majors/specialisations in financial planning. Conditions for each degree are specified, for example, particular subjects must be completed. FASEA has stated its intention to update and maintain a list of Approved degrees on its website6 but this is not yet available.

A condition that will apply to all the FASEA Approved degrees is that the candidate must complete a course on the Code of Ethics, unless the degree includes such a course. FASEA has only recently finalised the Code of Ethics so education providers have been unable to develop and offer courses in this area to date. This means that a New Entrant who has already completed one of the degrees specified in FASEA’s determination will not be considered to have met the Approved degree requirement until they have completed this additional course.

The postgraduate pathway is designed for those with existing tertiary qualifications and/or substantial work experience in a related field at the discretion of the education provider’s postgraduate entry policy. FASEA refers to these individuals as “Career changers”.7

Professional Year

The Professional Year is a year of workplace training and other activities intended to develop professional competence to provide financial advice.

By the end of the Professional Year, the individual will need to:

  • be able to undertake specified activities

Specified activities

  • analyse, compare and apply underlying principles and theories from relevant areas of technical competence to complete work assignments and make decisions, and to do so effectively
  • integrate technical competence and professional skills in managing and completing work assignments
  • understand and apply the Code of Ethics, including in relation to avoiding inappropriate personal advantage, and applying professional values and attitudes, to work assignments
  • present information and recommendations, and explain ideas, orally and in writing in a clear confident and professional manner likely to be understood by retail clients
  • make appropriate judgments on courses of action, drawing on professional values, ethics and attitudes, and
  • with appropriate consultation, assess, research and develop appropriate solutions for complex business or client problems and issues.

  • demonstrate key competencies; and

Key competencies

  • technical competence: technical proficiency to ensure that advice strategies are appropriate to the objectives, financial situations and needs of different classes of retail clients
  • client care and practice: the ability to act as a client-centric practitioner in advising both new and existing clients
  • regulatory compliance and consumer protection: a satisfactory understanding of applicable legal obligations and how to comply with them, and
  • professionalism and ethics: the ability to act as an ethical professional

  • have passed the Exam.

A final completion certificate from the individual’s supervisor and licensee is required to evidence that the above requirements have been met.

In satisfying the Professional Year requirements, supervisors and licensees have important roles in planning and monitoring the work and training required of aspiring professional Advisers.

Supervisor and licensee requirements

A supervisor is required to have at least two years working as an Adviser (excluding the Professional Year). The individual being supervised can have more than one supervisor in their Professional Year whether successive or joint (eg different supervisors for different advice specialisations).8

Supervisors must provide supervision that actively assists the New Entrant in getting the full benefit of the Professional Year. The supervisor must approve, in writing, the statement of advice provided to the client and is taken to have provided the advice. A client who deals with an individual during their Professional Year must be informed (in writing) of this status and of the name and contact details of the supervisor.

A licensee is required to ensure that appropriate supervision is provided and make appropriate resources and opportunities available to enable the individual to meet the Professional Year requirements.

Professional Year plan

The individual, supervisor and licensee must develop and agree on a Professional Year plan. The individual, supervisor(s) and licensee must take reasonable steps to ensure the plan is followed.

Professional Year plan

A Professional Year plan (including as varied) must be in writing and must:

  • identify the person, the supervisor and the responsible licensee
  • identify any other Adviser who will be involved in the supervision of the person, including in respect of areas of specialist expertise
  • identify the period and each quarter of the Professional Year
  • identify the particular work and training outcomes to be achieved by the person during the Professional Year and during each quarter
  • describe the resources and opportunities that the responsible licensee will make available
  • for each quarter of the Professional Year, describe in detail the work activities and the structured training to be undertaken, and
  • set out any other arrangements for the Professional Year.

FASEA has indicated that it may provide a template completion Professional Year plan.9


Minimum hours

Individuals need to gain a minimum of the full-time equivalent of one year of relevant experience before they can be authorised as an Adviser.

FASEA has determined this to be 1,600 hours split between:

  • 100 hours of structured education and training, and
  • 1,500 hours of work and supervised experience.

Formal education can contribute to the 100 hours structured training requirement of the Professional Year. For example, Advisers who haven’t yet completed the Code of Ethics course will be able to count that towards their structured training. Other education and training could include:

  • education for the purposes of achieving a professional designation
  • education to be accredited in specific financial products, and
  • education for the purposes of meeting requirements in specific financial advice provision (examples of SMSF, stockbroking and aged care are given in FASEA’s Policy Statement10).

Quarterly activity requirements

The Professional Year is split into four quarters, with particular requirements specific to each. An individual is not able to progress from one quarter's activities to the next quarter's activities unless they have actually completed the work activities and structured training planned for that quarter. Work activities or structured training for Quarter 3 cannot commence until the individual has passed the Exam.

Quarter 1

(client observations and supporting supervisor or other relevant provider)

The individual must undertake all the following work activities, under the direct supervision of the supervisor or other Advisers nominated by the supervisor:

  • shadow the supervisor or other relevant providers nominated by the supervisor in meetings with a range of clients
  • complete post-meeting documentation as required and undertake follow up actions
  • discuss with the supervisor appropriate advice strategies suitable to the clients’ objectives, financial situations and needs, and
  • actively participate in administration and “back office” activities.

Quarter 2

(supervised client engagement and advice preparation)

The individual must undertake all the following work activities, under the direct supervision of the supervisor or other Advisers nominated by the supervisor:

  • prepare for client meetings
  • conduct meetings with clients
  • prepare draft documentation for clients, including:
    • advice strategies, and
    • statements of advice
    each suitable to the clients’ objectives, financial situations and needs, and
  • complete relevant administration and “back office” activities.

Each of Quarters 3 and 4

(indirect supervision of client engagement and advice preparation)

The individual must undertake all the following work activities, under the limited or indirect supervision by the supervisor or Advisers nominated by the supervisor:

  • model strategies and research products to determine suitability to clients’ objectives, financial situations and needs
  • determine and prepare appropriate client documentation (such as statements of advice)
  • complete relevant administration and “back office” activities, and
  • satisfactorily identify and resolve ethical dilemmas (see below).


Ethical dilemmas

For each of Quarters 3 and 4, the work activities include identifying and resolving at least two problems (ethical dilemmas) relevant to Adviser practice. The objective is to develop knowledge and understanding of the Code of Ethics and the ability to resolve ethical issues as they arise. At this stage, FASEA has not provided any further guidance around the types of issues that should be covered and the source of ethical dilemmas.

Completion certificates

At the end of each quarter an individual's supervisor must give a completion certificate, certifying satisfactory completion of the work for that quarter, before the next quarter can commence.

Completion certificate - Quarter

The supervisor must apply the following general criteria in assessing whether to give an individual a completion certificate for a quarter:

  • whether the individual has completed and maintained his or her logbook for the quarter (see below)
  • the number of hours of work activities and structured training the individual has undertaken, in accordance with the Professional Year plan, up to the end of the quarter
  • the extent to which the individual has achieved the particular work and training outcomes set out in the Professional Year plan for the quarter
  • the extent to which the individual is capable of satisfactorily completing the work and structured training for the next quarter
  • for Quarters 3 and 4—whether the individual’s identification and resolution of the ethical dilemmas demonstrate the ability to identify ethical issues and resolve them appropriately
  • whether the individual has achieved satisfactory progress against the requirements of his or her Professional Year plan, including satisfactorily addressing areas for further development.

Completion certificate - Final

The following additional requirements apply to final completion certificates:

  • The individual must have:
    • in accordance with the Professional Year plan, completed the required hours of work activities and structured training, and
      • passed the Exam.
    • The licensee must also give the certificate and can only do so if:
      • the licensee is satisfied of the general criteria listed above, and
      • has conducted an audit of at least five client files on which the individual worked during their Professional Year and is satisfied that the individual can be relied on to comply with applicable legal and regulatory requirements.

    FASEA has indicated that it may provide a template completion certificate.11

    Record-keeping (including logbook)

    An individual undertaking their Professional Year is required to complete and maintain a logbook of:

    • the hours spent on work activities and structured training during his or her Professional Year
    • details of the work activities and structured training undertaken, and
    • notifications given to clients.

    FASEA has indicated that it may provide a template logbook template.12

    Supervisors are also required to keep detailed records of their assessments and the reasons for those assessments. Licensees responsible for individuals undertaking their Professional Year must make complete and accurate records in relation to completion certificates.

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    1 Other than basic banking products, general insurance products, consumer credit insurance, or a combination of any of these products.

    2 Existing Advisers are those who were authorised to provide personal advice to retail clients at any time between 1 January 2016 and 1 January 2019 (and who are not subject to a banning order or enforceable undertaking not to provide financial product advice or financial services generally). These Advisers are eligible for transitional arrangements.

    3 The Code of Ethics comes into effect from 1 January 2020 and applies to both Exiting Advisers and Provisional Financial Advisers.

    4 For New Entrants, the new CPD requirements don’t apply until completion of the Professional Year. If this finishes part-way through the CPD year the licensee may choose to pro-rata the CPD hours for the period between completion of the Professional Year and the end of the licensees CPD year (see FPS004, Continuing Professional Development Policy, January 2019.

    5 Approved degrees are listed in Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2018, registered on 24 December 2018.

    6 See FPS001 Education Pathways Policy, January 2019.

    7 See FPS001 Education Pathways Policy, January 2019.

    8 Refer to paragraph 2.34 of the Explanatory Memorandum to the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016.

    9 See FPS003 Work & Training Requirement (Professional Year) Policy, November 2018.

    10 See FPS003 Work & Training Requirement (Professional Year) Policy, November 2018.

    11 See FPS003 Work & Training Requirement (Professional Year) Policy, November 2018.

    12 See FPS003 Work & Training Requirement (Professional Year) Policy, November 2018.

    The information provided is not personal advice. It does not take into account the investment objectives, financial situation or needs of any particular investor and should not be relied upon as advice. Investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs. Any examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental.

    While the information provided here is given in good faith and is believed to be accurate and reliable as at 7 March 2019, it is provided by MIML for information only. We will not be liable for any losses arising from reliance on this information.

    MIML and Macquarie Bank Limited do not give, nor purport to give, any taxation advice. The application of taxation laws to each client depends on that client’s individual circumstances. Accordingly, clients should seek independent professional advice on taxation implications before making any decisions about a financial product or class of products.

    Copyright 2019 Macquarie Investment Management Limited.