Study reveals link between adviser education and misconduct

In a recent paper, adviser and researcher Ben Neilson and lecturer Steven Lee revealed a clear correlation between lower education levels and higher instances of banning orders.

The paper, titled, Identifying the properties and impact of misconduct: Evidence from Australian financial advisers, identified a positive trend post-2019, the introduction of mandatory education requirement, suggesting that stringent educational prerequisites may be a catalyst for positive change within the sector.

“We see increases to education levels and decreases in misconduct instances throughout findings, which may support the validation of mandatory education introductions and begin the changing tides,” the paper reads.

For consumers navigating the complex world of financial advice, these findings provide a valuable tool, according to the paper’s authors.

Namely, understanding the correlation between an adviser’s education level and their likelihood of misconduct empowers consumers to make more informed choices when selecting a financial adviser.

“Uneducated Australian financial advisers cause significant consumer pain due to their unethical actions, which include providing poor advice, mis-selling financial products, and charging excessive fees, highlighting the importance of research focused on addressing these issues to improve the quality and professionalism of the financial advice sector,” the paper reads.

As the financial advice profession undergoes a transformative phase, the paper’s findings underscore the broader implications of educational reforms.

According to the authors, the correlation between higher education levels and reduced instances of misconduct not only validates the need for mandatory education but also serves as a catalyst for ongoing discussions on enhancing the professionalism of the sector.

“Although financial advisers are often presumed to be professionals, they are yet to be officially recognised by governments, regulators, academics and sector participants; the sector remains in a state of development.

“This study identifies elements of misconduct to further form and evolve the Australian financial sector perception while contributing to the literature surrounding ethics and misconduct within financial services.”

In empowering consumers and contributing to the sector’s professionalism, Mr Neilson hopes the research sparks discussions for a more transparent and trustworthy financial advice landscape.

“The paper serves as a catalyst for fostering trust in the sector, a trust that is paramount for the sustainable growth and development of the financial industry,” Mr Neilson told ifa.

“As we navigate an era where financial landscapes are evolving rapidly, the synthesis of education, regulatory scrutiny, and consumer empowerment emerges as a powerful trifecta. This paper, by dissecting the link between misconduct and education, not only underscores the importance of ongoing reforms but also propels the financial planning sector towards a future defined by transparency, accountability, and heightened professionalism.”

Mr Neilson added that, in embracing the challenges and opportunities presented by these regulatory shifts, “practitioners are not merely participants, they are architects of a profession that is shaping the financial well-being of individuals and communities”.

“As stewards of financial wisdom, practitioners can take pride in being part of the youngest emerging profession, one that is committed to continuous learning, ethical conduct, and client-centric practices.”