Financial Advisers Say New Disciplinary Body Excessive

Financial advisers say the government’s proposal to create a new disciplinary body risks conflicting with its professional standards legislation by duplicating code monitoring requirements and tying the industry up in excessive red tape.

As hundreds of financial advisers prepare to gather at industry events in Sydney and Adelaide this week, there is expectation the government will relent to growing pressure to extend the timeframe for advisers to meet new educational qualifications being imposed by the Financial Adviser Standards and Ethics Authority.

While that would be welcomed as a way to stem the exodus of advisers, their industry representatives say a plan, announced in the royal commission implementation roadmap last Monday, to set up a new disciplinary body – as recommended by the Hayne inquiry – appears to overlap with the creation of a new body to enforce compliance with the industry code of ethics, currently being considered by the Australian Securities and Investments Commission.

Code monitoring is a requirement of the FASEA professional standards legislation, which came into force in 2017, and requires every financial adviser to belong to a “code monitoring scheme” by January 1.

Six peak bodies – the Financial Planning Association of Australia, the Association of Financial Advisers, FINSIA, the SMSF Association, Stockbrokers and Financial Advisers, and Boutique Financial Advisers – made an application earlier this month for ASIC approval for a new entity, Code Monitoring Australia (CMA), to conduct this role.

The government said last week that while it supports code monitoring, it would legislate to require all financial advisers to be registered with a new body, which would receive serious compliance concerns and “be responsible for the registration, monitoring and sanctioning of financial advisers,” the royal commission roadmap said.

“It looks like a duplication,” said Philip Kewin, CEO of the Association of Financial Advisers.

“If the professional standards are set up with a code monitoring body, which is what we are heading towards, does this new single body oversee ASIC and FASEA? And if so, isn’t that additional red tape which the government is trying to remove?”

Dante de Gori, CEO of the Financial Planning Association of Australia, said it was unclear whether Code Monitoring Australia would become the new single disciplinary body, or whether it would be something else.

“There is uncertainty about it, we don’t know what the future will be,” he said. “We welcome the government proceeding with code monitoring but we need clarity what it means beyond 2020.

“Creating CMA has been a lot of work over [the] last two years, it’s taken a lot of time and effort to make sure we can adhere to the requirement imposed on all advisers.”

Hope for extension

Concerns about regulatory overreach come as besieged financial advisers and wealth and superannuation professionals gather at two meetings this week.

The Financial Services Council is expecting more than 400 at its two-day meeting in Sydney, while the Association of Financial Advisers expects 550 delegates at a three-day meeting in Adelaide. Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, is scheduled to speak at both events.

The industry is hopeful the government will back its calls for an extension to the deadlines for advisers to complete FASEA exams. The AFA and FPA has been advocating for a 12-month extension for completing the exam to December 31, 2021, and a 24-month extension for completing a graduate diploma to December 31, 2025.

“Financial advisers need to balance their study obligations with their business and family responsibilities,” Mr Kewin said.

“We understand we need to be a profession and meet certain standards of education to give consumers confidence when they see an adviser they have qualifications and experience necessary. However, the FASEA process has been far more drawn out then expected, and the industry needs time to be able to transition,” he said.

“We are very optimistic that the government will look at extending the dates for the degree and exam to enable as many advisers as possible to transition and meet standards and continue to give advice to customers.”

Advisers are also hoping FASEA exercised its discretion under the act to enable experienced advisers to be given credit for courses and continuing professional development they have undertaken in the past.


By James Eyers

Financial Review

26 August 2019

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