Exam changes will make entry to financial advice easier: FSC

In its submission to the government on Corporations (relevant providers – education and training standards) amendment (2024 measures No 1) determination 2024 (exposure draft), the FSC noted the pressing need to make it easier for new advisers to join the profession.

“With just 15,000 financial advisers in the industry, new entrants, and the Australian Financial Services licensees that authorise them, face considerable barriers and cost in meeting the current education requirements,” the FSC submission said.

“The determination’s provisions to reform the exam’s administration and structure will make it easier for more advisers to enter the profession and reduce the cost of providing advice without diminishing education standards.”

The government’s proposed changes would see the removal of short answer questions and an increase in multiple choice questions, as well as removing the requirement that only provisional relevant providers and existing advisers can sit the exam.

The draft explanatory statement said that exams based on multiple choice questions “create efficiencies” by enabling computer marking to replace manual marking.

The explanatory material added that “current exam eligibility criteria which restricts access to the exam based on the person having already met the qualifications standard is causing unnecessary delays for new entrants seeking to enter the profession”.

Addressing the move to all multiple choice questions, the FSC said it would “support industry to aggregate data on qualifying new entrants through multiple choice questions than subjective written responses”.

It also noted that the move would reduce expenses and, in turn, “significantly reduce the cost of onboarding new entrants via the exam than is the case currently”.

“Arguments that multiple choice questions somewhat make it ‘easier’ for students to game the exam are without foundation. Multiple choice exam can be appropriately set and rigorous,” the FSC said in its submission.

“Given the proposal requires at least 70 questions, we view this as adequate to test such knowledge rigorously without diminishing education standards.”

Allowing professional year (PY) candidates to sit the exam prior to completing their qualifications, the FSC added, will increase flexibility for prospective advisers while they complete their study.

“Currently, a candidate can start the PY program if they are in the last semester of completing their qualification. They must also pass the exam before they can commence Quarter 3. Typically, PY candidates will sit the exam while they are going through Quarter 2,” it said.

“Given there are four exam sittings in a calendar year, this could potentially cause some delays, especially if a candidate fails an exam and has to re-sit. Most PY candidates pass the exam on their first attempt and seldom need to re-sit the exam. A benefit of the determination’s provisions is that it would allow candidates who are keen to sit the exam early to do so.”

The FSC joins both the Financial Advice Association Australia (FAAA) and the Stockbrokers and Investment Advisers Association (SIAA) in throwing their support behind the changes.

In its response to the proposed changes, the FAAA backed making the exam completely multiple choice, removing restrictions on who can sit the exam, and allowing students to sit the exam at a stage that is suitable for them.

“The FAAA is strongly supportive of these changes, which we hope will encourage more people to attempt the financial adviser exam and enter the advice profession,” said FAAA chief executive Sarah Abood.

While the SIAA also threw its support behind these changes, it also called on the government to go even further.

“Candidates should be able to sit the exam at any time and not be restricted to exam blocks,” it said.

Additionally, more tailored feedback should be provided to unsuccessful candidates so that they can improve in their next exam sitting, the SIAA noted.

“This is particularly important in light of the incapacity of the PY candidate to progress until they have passed the exam. Currently, exam feedback is not individual but generic,” it said.

“All it does is repeat the curriculum item relating to the question that the candidate has failed. It does not tell them why they failed that question or what particular matters they should study to pass the question at the next sitting.”