Investment advisers have been granted relief – for now – from meeting degree-level educational standards under the draft ‘Financial Advice Code’ released last week.
Instead of a degree-level qualification mooted for all ‘financial planning’ advice under the first version of the document released in March, the revised code applies a universal ‘level 5’ educational standard for all those wishing to operate in the coming regime.
The code sets behavioural and competence standards for an estimated 30,000 plus individuals who will be caught under the Financial Services Legislation Amendment Bill (FSLAB), which is due for its third reading in parliament this month.
While the new draft code dispenses with the ‘financial planning’ and ‘product’ advice distinctions laid down in the March iteration, it does separate ‘investment planning’ out for special attention in standard 11.
Under standard 11, investment advisers must have at least achieved a relevant level 5 certificate or “be an authorised financial adviser [AFA] immediately before the commencement of the code”.
However, the code says the investment planning educational benchmark “is an interim standard”.
“The Code Committee intends to consult in the future on whether higher qualifications should be required to demonstrate particular competence, knowledge, and skill for designing an investment plan for new entrants to the sector after a future date,” the draft document says.
The code sets comparable standards for entities (including robo-advice providers) and ‘nominated representatives’ offering investment advice. Akin to the qualifying investment entity (QFE) advisers in the current regime, ‘nominated representatives’ will operate directly under the auspices of licensed advisory businesses in the FSLAB era.
The Code Working Group (CWG) “intends to review the latest version of the Level 5 qualification in force at the time the draft code is submitted to the Minister for approval and, if satisfied that its qualification outcomes are appropriate, specify that version in the code”, the document says.
Overall, the updated draft code differs “markedly” from the original version, according to CWG chair, Angus Dale-Jones.
“We’ve slimmed down the breadth of [the code] significantly,” Dale-Jones said.
The revised code offers 12 standards under two sub-heads – covering behaviour and competence – compared to four in the original version, covering: ethical behaviour; conduct and client care; general competence, knowledge, and skill that apply to all persons that give financial advice; and, particular competence, knowledge.
In a statement, Dale-Jones said: “We have also taken a principles-based approach to ensure the Code is flexible and works for all the different types of businesses that provide financial advice, including small firms.”
The draft code is open for consultation until November 9 with a final version to be delivered early next year to the Minister, who has three months to approve the document. Once the code is approved, the FSLAB era will officially kick off at least nine months after.
FSLAB will usher in an Australian-like adviser licensing regime rather than the current individual licence system applying to AFAs. Ironically, across the Tasman the adviser licensing system might swing the other way following the bruising Royal Commission (RC) into financial services.
In his interim report published earlier this month, RC Commissioner Kenneth Hayne, says: “What is gained by having this [entity licensing] structure? Would there be advantage in providing for the licensing of authorised representatives, thus bringing them under the direct supervision of ASIC?”