How is FASEA impacting our industry?


Phillip Win

There are many financial planners who may not have formal studies and qualifications, but who have clearly demonstrated an ethical, professional attitude and behaved in a manner that has allowed them to forge strong relationships over many years. In many cases they are also maintaining Continuing Professional Development (CPD) at more than minimum standards.

However, there are also some financial planners who may have been attracted to the industry due to financial incentives and its (current) ease of entry. Some of these individuals have not demonstrated the behaviour expected of a person advising on a client’s life savings. This conduct is being revealed to the public via evidence in the Royal Commission into Financial Services.

Financial Planners are under the spotlight and FASEA is forcing many to consider their future in the industry.

Planners close to retirement

Many of those at the mature stage of their working lives are already considering retirement, and the FASEA requirements may well accelerate that. The industry may well be the poorer due to the drain of corporate memory. These clients will also need to be transitioned to a new financial adviser who is suitably qualified under the
FASEA standards. Will clients be happy?

The businesses of those retiring will need to be sold. This will require finance from a banking sector that has made it clear will be harder to borrow money from. The appetite for banks to lend to the financial planning sector is low, especially when you consider they are now looking to divest their wealth management businesses.

What will happen to practice valuations with a change in the demand and supply dynamics? If the sorts of numbers reported elsewhere in the media are true (some suggesting over 50% of planners may exit), this demand/supply imbalance could threaten the very thing financial planners have worked with their clients over the years to achieve – their own financial independence.

Far enough away from retirement to have to make a considered decision

There will be financial planners who do not hold a “related” degree who will need to undergo considerable additional study to meet the proposed FASEA standard by 1 January 2024. Even if a financial planner holds a related degree, they will still need to undertake a bridging course of 3 subjects, covering Chapter 7 of the Corporations Act, the FASEA Code of Ethics and a course of Behavioural Finance.

Financial Planners will need to assess if they wish to undergo the additional studies to stay in the industry. They will need to balance their existing work and family commitments with study requirements. Some may choose to exit, while others will take on the challenge.

The dynamics noted for planners close to retirement will play out for those choosing to not take up the study challenge, accelerating turnover in our industry.

How will FASEA impact your recruitment process and your business?

In short, it will be expensive. Partly because, for most firms, additional study time will be required for existing planners, and many firms will need to support some or all of the direct costs of the extra study, if they have an employee model. Even if this isn’t the case, extra study time is time away from supporting existing clients and helping the firm grow.

It’s also possible that the changes will increase wages costs of those planners who do meet the criteria. Planners exiting the industry because of the changes will create vacancies, and new entrants to the industry with the qualifications already complete will be in high demand – accelerating this trend.

Employers will need to ensure that prospective financial planners actually hold the qualifications they say they have, imposing additional checks and costs and slowing down the recruitment process. If the financial planner does not hold a related degree, the Practice may need to pay for the employee to get their degree and further studies, and support their professional year, in order to stay competitive in recruitment.

It will be very important to ensure that a Practice’s policy statement for study is robust and clear for employees.

Parting thoughts

I feel that much of the recent attempts to “formalise” codes of conduct and how financial planners should work with clients was all laid out when I joined the industry over 20 years ago. The code I signed up for was very clear on what was expected from me as a (then budding) financial planner.

up to, and be held account to, a short, unambiguous and robust code of conduct with this principal at its core irrespective of their association memberships.

I am concerned by the current proposal to not recognise the CFP Program (apart from possible subject exemptions). This program is high-quality and I believe it more than adequately meets the requirements of what FASEA is attempting to achieve. In my view it should be recognised as an accepted qualification for all those who have attained the program by study (rather than ‘grandfathered’ into the designation).

The FASEA proposals should also address financial planners’ CPD requirements. There is little to be gained to by studying Chapter 7 of the Corporations Law and then never reviewing it again. Behavioural finance is another subject that should form part of CPD components, not just be a one-off “tick-a-box” course.

I have a good friend who is a financial planner and to whom I would refer my closest and dearest family and friends. He does not have a related degree and is close to retirement. He is one of the best financial planners in our industry and yet he will need to make some serious decisions in the coming years on what he will do. He is technically superior to most planners I know and is a trusted advisor to his clients. Perhaps he is collateral damage and an unintended consequence of our industry on its journey to professionalise – but it’s sad to see such knowledge and talent go to waste.

By Phillip Win, Managing Director, Senior Financial Planner

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