What was the FASEA exam supposed to do again?

FASEA had its origins in the Ripoll inquiry (or more correctly the parliamentary joint committee on corporations and financial services) held in 2009. This inquiry was hot on the heels of the GFC where we had seen a credit market crisis that had effectively blown up a number of financial products and their providers. It also focused on the antics of Storm Financial – the now infamous financial planning group that created havoc among its clients by often highly inappropriate double gearing strategies. Both of these events caused significant financial loss for some investors.

Advisers were clearly in the crosshairs as a result of this as it became apparent that poor sales practices (as opposed to advice practices) were to blame. Many would say that we have not been out of the crosshairs since. I use a lethal analogy here on purpose because many advisers I talk to certainly feel under fire.

I took the time to re-read the Ripoll report again (obviously a boring life) and was surprised to see that there is no recommendation to actually hold an exam for all existing advisers. Recommendation 9 in Ripoll states: "The committee recommends that ASIC immediately begin consultation with the financial services industry on the establishment of an independent, industry-based professional standards board to oversee nomenclature, and competency and conduct standards for financial advisers."

I can’t agree more with this recommendation and, as many of you will have previously read, I strongly support the development of standards for financial advisers and planners. We need these as a means of being able to identify appropriate, as well as inappropriate, financial advice.

Unfortunately, we have now got FASEA. Tasked with the setting of education, training and ethical standards for financial advisers but not with the identification of what education and training standards should be taught. And what is the first big ticket item that we have from them – the financial adviser exam. A compulsory exam of 3.5 hours to be completed within two years from the introduction of the new standards. Oh wait, make that 18 months as the exam was only released in July.

So, what will the exam cover – superannuation, Centrelink, life insurance, securities, investment strategies, cash flow management, estate planning…

No. It will cover regulations, ethics and financial advice construction.

There is no doubt that a single exam would be unable to assess competencies for all the areas mentioned above, and there has been no discussion at all regarding those advisers who actually specialise and don’t work in all areas. But surely this should have been the focus of FASEA discussions if you are going to implement such as blunt instrument as a single exam.

But let’s get back to the actual exam for a moment. I have reviewed the suggested reading for advisers to prepare for the exam (not the extension reading – just the suggested reading) and this runs to 2,196 pages of reading. Now I’ve been around higher education for some time now, but I have never seen anything like this before. Effectively, FASEA is saying just do the reading and you should be OK. WHAT!

Not to put too fine a point on it, but this is an examination that has the capacity to end careers and disrupt lives and this is the level of support provided? Perhaps there is an expectation that advisers will undertake professional courses to help them pass the exam at their cost, in addition to the $594 for each sitting of the exam.

As far as I can establish, this will be the first time in Australia that existing professionals will be asked to pass an exam just to continue practising.

If I wanted to get all ‘bolshie’ – I’d probably suggest that we just boycott the exam, but I doubt there would be many who would want to follow me. There is simply too much at stake to take the chance as not passing the exam by the prescribed time will mean a brand-new entry into the profession – including a professional year and perhaps fresh qualifications.

So here we are again – being driven by compliance rather than quality of advice. I don’t know about you but I’m getting sick of it!

Paul Moran is a CFP and SSA who started practice in 1995. He was the IFA Australian Financial Planner of the Year in 2004 and was a member of the AFR Smart Investor Top 50 in 2004, 2005 and 2012. He is a managing partner of a self-licensed practice in Carlton North, Victoria. He is firmly committed to continual education and lifelong learning and holds master's degrees in business administration, taxation and financial planning. With a bit of luck, he will finally complete his doctorate this year.