Like Melbourne weather, adviser education standards change again

Not happy with the government’s settings on adviser education standards? Well, wait five minutes and they’ll change. Is the latest change a return to the bad old days, or simply common sense prevailing?

“The current standard is unsustainable,” lamented the latest update from Treasury regarding yet another change to the education standards of financial advisers. In a significant about-face, the government has all but thrown out the Financial Adviser Standards and Ethics Authority (FASEA) reforms less than a decade after they sent shockwaves through the financial advice industry. 

One could not help but feel that perhaps this is an opportunity for the financial advice industry to act more like the medical industry; one in which membership of professional bodies or associations is central to being allowed to practise as a specialist. That is, to protect the quality of the industry we have created, rather than once again opening the doors to anyone who wants to call themselves a ‘financial adviser.’ 

“To support the supply of high-quality, helpful and safe advice,” was the stated reason behind the government’s latest announcement. Under the planned changes, the need for new entrants into financial advice to have an “approved” degree before embarking on the additional training requirements has been removed. In a step back, new entrants will simply need to have completed a “bachelor’s degree or higher in any discipline.” 

While prospective advisers will need to meet minimum study requirements in areas such as finance, economics and accounting, it represents a significant rolling-back of today’s requirements. In fact, there will be no change for existing advisers who must still meet the approved degree requirements by 1 January 2026. 

The planned changes are aimed at addressing the supply shortage of financial advisers and hopefully opening up more financial advice to the mass market, but we must ask the question whether this is something we really need? In my discussions, it seems that financial advisers as an industry are finally reaping some of the rewards of all the risk they have taken building their own businesses, only to see a potential flood of less-qualified entrants enter the market.

The announcement was partnered with confirmation that the ‘qualified’ or renamed ‘new class of adviser (NCA)’ would only need to be ‘diploma-level’ qualified in order to provide the limited level of financial advice approved under the proposed changes. While a step in the right direction, which would allow greater access to scaled and more targeted advice, it raises a big question mark, given that we were told less than ten years ago that a diploma was not enough education to be able to deliver quality financial advice. 

For independent advisers, the logical employment destination for an influx of less-qualified NCAs is their larger corporate and industry fund competitors. Full-service advisers would struggle to employ a NCA.

On the positive side, as a growing advice group, Wattle would welcome the access to a larger pool of graduates and financial planners, which may also see salary increases across the industry begin to slow.