The Minister for Revenue and Financial Services, Kelly O’Dwyer MP, announced today that new requirements to raise the competency and ethical conduct standards of financial advisers will commence on 1 January 2019.
These requirements are part of the financial advice reforms and include the following:
- compulsory education requirements for both new and existing financial advisers;
- supervision requirements for new advisers;
- a code of ethics for the industry;
- an exam that will represent a common benchmark across the industry; and
- an ongoing professional development component.
The previous education requirements, set out in ASIC guidance, allowed some financial advisers to become qualified to provide financial advice to retail consumers after only four days of training. Understandably, both the Financial System Inquiry and the Parliamentary Joint Committee found that these requirements were not sufficient.
The reforms establish a commonwealth standard setting body to govern the professional standing of the financial advice sector. The body will set the educational requirements, develop and set the exam and create the uniform Code of Ethics.
But general insurance brokers can rest easy as the legislation has been passed by the Parliament with the general insurance carve out intact.
“This is the result of over two years’ lobbying by NIBA, and our consistent arguing that there is no evidence of systemic poor advice on general insurance products and services,” says Dallas Booth, NIBA CEO.
But he emphasises: “Brokers have a clear education path to achieve and maintain to claim to be a Qualified Practising Insurance Broker.”
From the commencement date, new advisers will be required to hold a relevant degree before they are eligible to commence the supervision year and to sit the exam. Existing advisers will have two years, until 1 January 2021, to pass the exam and five years, until 1 January 2024, to reach a standard equivalent to a degree. The transition period recognises that existing advisers may need to complete the education requirements on a part-time basis while continuing to service their existing clients. The Code of Ethics will commence on 1 January 2020, with all advisers being required to adhere to the code from that day forward.
Once the reforms are bedded down, the Government will turn its attention to developing and implementing an industry funding model for the standards body.
“These reforms demonstrate the Government’s commitment to building trust and confidence in the financial advice industry by ensuring that consumers have access to financial advisers who are professional and competent, and who will put their interests first,” Minister O’Dwyer said.
“The Government is delivering on its ambitious financial sector reform agenda to improve consumer outcomes in the financial services industry. A Royal Commission will not benefit consumers, will take years to complete and will cost the Australian taxpayers millions of dollars.”