If we are not careful, consumers are set to become even more confused about who to turn to for financial advice, according to The Advisers Association (TAA).
Referencing the association’s recent submission to Treasury’s consultation on Education Standards for Experienced Financial Advisers and Technical Fixes for New Entrants, TAA CEO Neil Macdonald said all consumers really want to know is that the financial adviser they are dealing with is suitably qualified, knows what they’re doing, and can be trusted.
‘We must have an experienced pathway because in order to fulfil consumer demand for advice, we have to do something to stem the exit of highly experienced advisers from the profession,’ he said. ‘But are we over-complicating it? If we stand on the outside for a moment and look in, consumers must be wondering what is so difficult.’
Some of TAA’s concerns centre around the way the experienced pathway is being framed.
‘We think using terms like ‘experienced provider’ and ‘relevant provider’ just creates deeper consumer confusion,’ he said. ‘The differences between these two providers are not immediately clear and will have to be explained. There’s also the risk that people will think ‘experienced’ is somehow better than ‘relevant’. It certainly looks like that at first glance.’
TAA’s preference is the same naming convention for all financial advisers in law.
‘The difference between an experienced adviser and a relevant adviser could then be simply addressed at the consumer level, for example, adviser qualifications or lack thereof, and experience, could be contained in the Financial Services Guide and marketing materials,’ Mr Macdonald said.
Consumers are also likely confused about the level of education and training required of advisers.
‘We’re sure many consumers still don’t know what qualifications financial advisers must hold and, if they do, they are likely scratching their heads as to why there has so far been such a one-size-fits-all approach to adviser education,’ he said.
‘They’re likely also wondering why prior learning and a broader range of relevant qualifications are not better recognised, particularly for those wanting to enter the profession from closely-related professions.’
Mr Macdonald said it does not make sense that new entrants are being given flexibility around process changes to education and training standards, when experienced advisers are not.
‘We’re trying to grow a profession here, so these anomalies are counter-intuitive,’ Mr Macdonald said.
TAA is also concerned about the many different months and years being applied to the 10-year experienced pathway.
‘It creates unnecessary risks, unintended gaps and unnecessary complexity for Treasury, regulators, licensees and advisers,’ Mr Macdonald said. ‘This level of complexity might be all well and good if it provided substantial additional consumer protection, but in our opinion, it does not – and once again, it will need to be explained to consumers, creating yet another education exercise.’
To retain experienced advisers and for consistency, TAA thinks the period for the 10-year experience should be aligned with the current education standards deadline, i.e., 31 December 2025 or ‘before 1 January 2026’.
‘Wealth Data identified* that this change alone would enable an additional 555 advisers to meet the experienced pathway, continue to provide advice to their clients and, if the Quality of Advice Review recommendations are implemented promptly, free up their time to advise more consumers,’ Mr Macdonald said.
*Using FAR records which showed that pre and post 31 Dec 2011, 3,586 advisers did not have a degree. If the 10-year experience were aligned with the education standards deadline, 4,141 highly experienced advisers (an additional 555), would be able to continue to provide advice to their clients without a degree pre and post Dec 2025.