FAAA continues to push for ethics requirement in experience pathway despite govt opposition

According to correspondence received by the Association of Independently Owned Financial Professionals (AIOFP) at a Treasury meeting addressing the experience pathway, the government does not endorse the inclusion of the successful completion of a formal course of study in ethics as a requirement for the pathway.

When Financial Services Minister Stephen Jones first announced the pathway over a year ago, it was suggested that aside from 10 years of experience and a clean record, advisers could be required to complete an approved ethics course.

However, the government has confirmed that under its proposal the only requirements for compliance should be 10 years (cumulative) of experience providing advice between 1 January 2007 and 31 December 2021, and no disciplinary actions recorded on the Financial Advisers Register before 31 December 2021.

In September last year, ahead of the government’s eventual release of legislation for consultation, the then Financial Planning Association (FPA) — now the FAAA — asked the government for the experience pathway to require advisers to have membership in a professional association or completion of an approved ethics course by 1 January 2026.

At the time, the FPA suggested that 80 per cent of its members believed an ethics unit should be required.

In a second submission to the government, the FPA, along with a number of associations as part of the Joint Association Working Group (JAWG), expressed a similar view, emphasising that the completion of an ethics unit was crucial.

Reiterating this view, in its latest submission to the government, the FAAA has doubled down on the earlier advocacy of its predecessor bodies.

“A requirement to complete the Code of Ethics Graduate level subject would ensure that all practicing advisers have a shared understanding and body of knowledge of our legislated code,” said the chief executive of the FAAA, Sarah Abood, in a statement on Friday.

The FAAA has also once again called for the experience pathway to be exclusively targeted to older advisers, with the inclusion of a 10-year sunset clause.

“This would represent an appropriate transition for established, experienced financial advisers and planners with a clean compliance record. Otherwise, we will be in a position whereby planners currently in their thirties could continue to practice indefinitely with no further qualifications required,” Ms Abood said.

The experienced pathway proposal has divided the advice industry, with the FAAA’s most recent survey showing that 50.9 per cent of members are supportive of a pathway, while 49.1 per cent are opposed. 

However, according to Ms Abood, the level of support would grow to 70 per cent if both the sunset clause and ethics unit changes were incorporated.

“Much of the opposition to this proposal has been focused around the fear that this change will undermine the perception of financial advice as a profession. Substantial changes have been made in recent years to professionalise financial advice, with a big impact on the many who have invested time and money in completing the additional qualifications required under FASEA,” Ms Abood said.

“Our message to members is that we are a profession, and your clients acknowledge this,” she noted.

According to ifa’s latest poll, as of Monday, 8 May, 51.5 per cent of readers disapprove of the experience pathway, while 46.6 per believe that it is what the industry needs.

Distinction between ‘experience’ and ‘relevant’ should be scrapped

Ms Abood and the FAAA are also opposed to the distinction between “experienced” and “relevant” on the Financial Advisers Register (FAR).

“It does us no service with consumers to create a two-tier system, using terminology that makes no sense to them. Many ‘relevant’ providers are also experienced. Many ‘experienced’ providers will also have qualifications. These points were very strongly made to us by members during this consultation,” she explained.

“This is why we have also recommended that a distinction between ‘experienced’ and ‘relevant’ providers not be made on the FAR. It is time for us to come together as a profession and ensure consumers can have full confidence in their financial adviser who is registered and licensed to practice,” Ms Abood added.

She urged the government to finalise the proposal soon, to enable financial advisers to make decisions about which pathway they will pursue. 

“We trust that this certainty will help many to make the decision to stay within this important profession.”