Friday 01 February 2019
Adviser Professional Standards Reforms
Friday 01 February 2019
In November 2018, the Financial Adviser Standards and Ethics Authority (FASEA) began to release the much-anticipated draft standards to give effect to the new Adviser Professional Standards reforms.
Since then, some of the legislative instruments have been registered, giving the industry long-awaited certainty over certain aspects of the reforms. In this article we cover the following key elements of the reforms, providing an overview of the requirements and what the changes mean for advisers.
- Continuing Professional Development (CPD)
- Degree requirements and Education Pathways
- Code of Ethics
The focus here is on the impacts to Existing Advisers (those who were authorised to provide personal advice to retail clients at any time between 1 January 2016 and 1 January 2019). These Advisers benefit from transitional arrangements which are outlined below). We will cover the requirements for new entrants at a future date.
We will endeavour to update this article regularly to take into account new developments, with the aim of it being used as a valuable reference tool.
The new professional standards for financial advisers commenced on 1 January 2019. The reforms are intended to raise the education, training and ethical standards of financial advisers by requiring those who provide personal advice to retail clients to hold a degree, pass an exam, meet CPD requirements and comply with a Code of Ethics. New advisers who enter the profession from 1 January 2019 also need to undertake a Professional Year.
FASEA has been tasked with setting the details of the new standards.
Who is required to meet the new standards?
Financial advisers will need to meet the standards if they give personal advice to retail clients on financial products, other than basic banking products, general insurance products, consumer credit insurance, or a combination of any of these products. This includes accountants who give advice under a limited Australian Financial Services Licence (AFSL).
For simplicity, we use the term ‘Adviser’ to refer to those who are subject to the standards.
Transitional arrangements apply to Existing Advisers, that is, 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).
The transitional arrangements give Existing Advisers until 1 January 2024 to meet the education standards and 1 January 2021 to pass the exam. Existing Advisers are not required to undertake a Professional Year.
Advisers can demonstrate they are an Existing Adviser by having had a status of 'current' on ASIC’s Financial Advisers Register at any time between 1 January 2016 and 1 January 2019. Without this recognition, ASIC has stated that it will treat an Adviser as a new entrant to the industry1.
The timeline below shows the key milestones for the key requirements of the reforms.
1 See ASIC Media Release 18-355MR Financial advisers urged to ensure registration by 31 December 2018, dated 23 November 2018.
2 See Corporations (Relevant Providers Continuing Professional Development Standard) Determination 2018, made on 19 December 2018 and FPS004 Continuing Professional Development Policy, January 2019.
3 See FPS001 Education Pathways Policy.
4 Approved degrees are listed in Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2018, made on 23 December 2018.
5 See FPS001 Education Pathways Policy.
6 See FPS001 Education Pathways Policy.
7 See FPS001 Education Pathways Policy.
8 See FPS0051 Education PathwaysForeign Qualifications Policy.
9 See FPS006 Examination policy.
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