DAVID KOCH:
Kelly, great to have you aboard. This is such a much needed area to set these standards for advice isn’t it, so consumers can trust the advice they’re getting.
KELLY O’DWYER:
Kochie you’re absolutely right, and it’s so critical that people need to be able to secure their financial future for themselves, for their families, if they’ve got businesses they need to get really great advice for their businesses. But the truth is, under the existing rules today, financial advisers can have less than two weeks’ worth of training before they hang up their shingle and can be trusted with people’s money. We simply think that’s not good enough and that we need to turbo-charge much higher standards so that people can have confidence in their financial adviser and can know that when their financial adviser is giving them advice that they are an expert and that they are giving advice to them in their best interests.
DAVID KOCH:
OK, so just run us through the standards that you’re going to be bringing in. They’re going to be phased in over a couple of years aren’t they?
KELLY O’DWYER:
That’s right. They’re going to be phased in because we know that there are a lot of people already who are financial advisers and the standards are going to be lifted very dramatically. We’re going to require that people need to either have a degree, or if they’re an existing adviser they need to be degree equivalent. These new professional standards will commence from 1 January 2019. We say that all advisers coming in and those that are existing advisers are going to need to sit an exam and there will be no exception from this exam. That they need to sign up to a code of ethics for the industry because so often we’ve heard so many stories about bad practices within the industry and we need to clean that up. And we know that it’s very important that when people come in to a profession, that they have appropriate supervision before they’re let loose on the public and we’ve seen that in the past with lawyers and accounts, where they’re properly supervised before they’re given the ability to provide direct advice. And finally, we’re going to require that they have an ongoing professional development component so that they are continuously learning and up-to-date with the very latest.
DAVID KOCH:
That’s terrific because whenever anyone sees an adviser, they should have an inherent expectation that they are professionals and what you’re saying now, we all have that expectation but behind the façade, it may not be there and you’re going to ensure that that expectation has met the proper standards.
KELLY O’DWYER:
That’s right.
DAVID KOCH:
Now who’s going to set the exam, who’s going to set the code of ethics? Will you do that, or will the Securities and Investment Commission do that?
KELLY O’DWYER:
Look it’s a great question, Kochie, and we believe it’s very important that it be an independent standards body, independent of the industry. It needs to be set up by the Commonwealth, though, because while we’ve seen the accountants, and we’ve seen that lawyers over hundreds of years have been able to regulate their own industry and professionally develop, we simply don’t have the time right now to wait those hundreds of years for this to happen for financial advisers. So the Government is intervening, we are setting up a Commonwealth company which will govern the professional standards for the financial advice industry. It will consist of nine people – three people from the industry, from bigger players, three people from smaller players, an ethicist, somebody who is an educational expert, and then someone who will be the chair of the particular body. And they will set the exam standards, they will put the advice and the education components together, and we think that is the best possible way to get the highest possible standards.
DAVID KOCH:
That’s a great idea. Will clients be represented on that standards body as well?
KELLY O’DWYER:
Indeed, we think it’s very important that they have a voice and part of the problem, I think, that has existed with the stories that we have heard is that clients, so often, their needs aren’t always considered first and foremost and yet, they’re at the heart of why financial advisers actually have a job.
DAVID KOCH:
Yep, and it will report, who does it report to? Does it report to a Minister or does it report to the Securities and Investment Commission?
KELLY O’DWYER:
So I’m the responsible minister and I will make the appointments to this particular independent panel and then they will be responsible for setting the standards so I won’t interfere with that. That will be a decision made entirely by them. And obviously, the regulator ASIC will have the ability to oversight when things are going well and not going well, more broadly in the industry as they currently do.
DAVID KOCH:
That’s terrific. That is a great step forward. What’s been the reaction of financial planners and advisers?
KELLY O’DWYER:
Look the reaction has been very positive and I think a number of them, particularly those who really take their job very seriously, and there are so many who really want their profession to be properly respected, they want to see everybody be lifted to a much higher standard. It will mean that there are some people who don’t pass the exam and don’t remain in the industry, and that is a consequence of actually having these higher standards. We don’t think that’s a bad thing at all, because those people who aren’t prepared to actually meet those higher requirements shouldn’t be providing advice to consumers.
DAVID KOCH:
And when you think about it, having a code of ethics, having a minimum standard, a compulsory education requirement, having the exam, pressure for ongoing professional development, that’s just a natural part of being a professional in any industry, whether it’s a financial adviser, whether it’s an engineer, an accountant or whatever.
KELLY O’DWYER:
That’s right. That’s exactly right, and I think a lot of people are probably pretty shocked to realise that that actually hasn’t happened to date, and that’s why we need to turbo-charge this to make sure it happens very quickly and we can lift the standards to the highest possible level over a fairly short period of time, and that’s why we’re very, very focused on this. Because the truth is, Kochie as you well know, we get these intergenerational reports that talk about our demographics as a nation. We know that our population is ageing, the number of people aged 65 and above is actually going to double up to 2050, and those people are also thinking about how to secure their retirement future as well, and so more and more people are going to need to rely on expert advice, so it needs to be the very best possible advice.
DAVID KOCH:
Well it’s a great step forward and well done on that. Wish you best with putting it all together, something that is much needed. Minister, really appreciate your time this afternoon.
KELLY O’DWYER:
Great pleasure.