Questions abound on NCA education requirements

Following Financial Services Minister Stephen Jones’ Delivering Better Financial Outcomes (DBFO) announcement on Tuesday night, Treasury released a fact sheet on the details that are currently available.

Among the limited information included is a statement on the education level for the new class of adviser (NCA), with Treasury noting they “will be required to complete an AQF level 5 diploma, to ensure they have the expertise to provide high-quality simple advice”.

Speaking with ifa, Financial Advice Association Australia chief executive Sarah Abood said that while the association is pleased with the statement of intent that NCAs are seen as a pipeline to becoming full financial advisers, “the questions are around the detail”.

“In particular for us, we have not supported NCAs being able to give retirement advice out of super funds. We don’t think that that advice can be considered simple,” Abood said.

“Many of the super funds employ advisers to provide this advice to the members, of course, which is fine, but I think it’s unlikely the diploma-level qualification would be sufficient to provide this kind of advice, which is highly complex even for so called ‘simple people’.

“The members of funds may have partners, they may or may not own their home, they may have stepfamilies – there’s so much potential complexity that the super funds are not aware of on the surface, and the idea that that kind of advice, which is substantially outside the member’s interests in the fund itself, I think for the cost of that advice to be collectively charged, that also, in our view, is inappropriate.”

How the pathway to becoming a professional adviser plays out is also up in the air, as it is so far unclear how universities would treat a diploma in terms of recognition of prior learning.

“We’ve been really clear that we want to see the education be appropriate for the advice, so that consumers are getting advice from somebody who knows what they’re talking about. That’s the most important point,” Abood said.

“Secondarily, we want it to count towards a planning degree. We haven’t yet had a chance to engage deeply with the universities on this, but I think that generally, AQF 5 would not be recognised in a standard way.

“There may be some other discussions that we can have about ways that study could be recognised, and each university is a little bit different in the way they’ve structured their courses, and how they manage recognition of prior learning and so on.”

In June, the Council of Australian Life Insurers (CALI) argued in favour of a Certificate IV level for NCAs, which would only reach AQF 4.

Responding to the suggestion at the Adviser Innovation Summit in Sydney, Abood said it would not help create a pathway for the new class of advisers to eventually make their way into providing professional financial advice.

“We only put on 370 new advisers last year and we’re not going to get our numbers back to where they need to be unless something dramatic changes. But for these people to be a potential source of new advisers, their education has to be in our ecosystem. It’s got to provide a pathway to financial planning degree,” she said.

“AQF 4 won’t cut it. You’re not going to get recognition for that if you want to go on and complete a bachelor’s degree and become a full financial adviser.”

While the level of education is higher than AQF 4, exactly what the diploma will involve is “going to be important”.

“We’re all assuming that if you’re working out of an insurer, it’ll be a diploma of insurance, and if you’re working out of a super fund, it’ll be a diploma of superannuation and so on, but we haven’t actually seen that level of detail either,” Abood told ifa.

“I think we need to go to the next level of detail.”