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FAAA chief executive Sarah Abood says the education standard for the new class of advisers needs to be “linked to the scope of advice”.
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FAAA pushes for higher education standards on new class of advisers
10 June 2024
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Speaking at the Adviser Innovation Summit in Sydney on Tuesday, Financial Advice Association Australia (FAAA) CEO Sarah Abood took aim at the Council of Australian Life Insurers’ (CALI) suggestion that the new class of “qualified advisers” should only need to attain a Certificate IV.
This would only reach the Australian Qualifications Framework (AQF) level four, which is a far cry short of what many had floated as desirable.
Additionally, Abood said, it would not help create a pathway for the new class of advisers to eventually make their way into providing professional financial advice.
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“We only put on 370 new advisers last year and we’re not going to get our numbers back to where they need to be unless something dramatic changes. But for these people to be a potential source of new advisers, their education has to be in our ecosystem. It’s got to provide a pathway to financial planning degree,” she said.
“AQF4 won’t cut it. You’re not going to get recognition for that if you want to go on and complete a bachelor’s degree and become a full financial adviser.”
Abood added that the issue is particularly important because among FAAA members that do support some kind of limited adviser class, it is because they want to ensure there is a pathway to get more advisers into the profession.
“They want to know that there are people coming through and in 10 years’ time there’s going to be someone to buy my business, there’s going to be someone to hand my clients over to, there’s going to be someone who’s talking to consumers about what’s in their best interest and broking the market for them, not just a single product issuer,” she said.
However, regardless of where the education level eventually falls, Abood said it is vital that it be “linked to the scope of the advice”.
“Because we don’t know what the scope is yet, it’s hard to clarify what that minimum requirement is,” she explained.
“Where we are digging our heels in is that this education has got to be a pathway to full advice because the huge opportunity for our profession in this class of adviser is that they become the advisers of the future.”
Abood argued that for these “qualified advisers” to begin working at the lower level, they will have some level of interest in the world of financial advice.
“They’ll have been on the phones in a call centre, perhaps through a super fund, perhaps for life insurance for a couple of years,” she said.
“At some point, the good ones are going to get bored. They’re going to want to complete their education and look at becoming a proper financial adviser. Just as people who were employed by the big banks and the very large licensees pre-Hayne were, that was the source of full comprehensive advisers that our sector essentially relied upon to replace itself, and that source is gone.”
Not a level playing field
However, the charging model is another area that needs to be looked at, Abood said. As things stand, the institutions that would employ the new class of adviser would not be allowed to directly charge for their services.
This set-up would make it almost impossible for advice firms to also employ them, creating an uneven playing field.
“Many members have put to us that it is not a level playing field because if a super fund can employ them in the life insurer and a bank and employ them, why can’t I?” Abood said.
“We do have members, particularly those with larger businesses, who are looking at this new class of advice and saying, ‘Well, maybe these are the people I can bring in to talk to the children, the grandchildren of my current clients. Maybe I can appoint a PY candidate as a QA and they can be engaging with clients much earlier than they currently can.’
“So, I do see the potential there, but they’re gonna have to charge for it because we’re not large super funds. We don’t have the ability to collectively charge for these services. We have proposed that there ought not to be restrictions on charging for this new class of advice. Otherwise, it’s not a level playing field.”
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