30 August 2019

Reforms to professional standards for financial advisers

The Morrison Government is committed to restoring trust and confidence in Australia's financial system, as part of its plan for a stronger economy. A key part of this is ensuring we continue to build trust in financial advice as a true profession.

The Government has already implemented or is taking action on several reforms that aims to improve the quality of financial advice, eliminate misconduct in the financial advice industry, and ensure that Australia has a vibrant and well-respected industry.

For example, the Government has increased the requirements for entities to investigate the full extent of financial adviser misconduct and inform and remediate customers that are affected, has introduced legislation into the Parliament that ends the grandfathering of conflicted remuneration paid to financial advisers and is establishing a new holistic approach for disciplining financial advisers for misconduct through a central body.

The Government has also established the Financial Adviser Standards and Ethics Authority (FASEA) – a body comprising industry, consumer ethics and education experts – to raise the education, training and ethical standards of financial advisers.

The standards require existing financial advisers to:

  • complete a FASEA-approved exam;
  • hold a bachelor's degree or equivalent qualifications;
  • undertake continuing professional development;
  • comply with a Code of Ethics; and
  • be a member of an ASIC-approved code monitoring scheme.

While making these changes to raise education standards in the industry, we also need to balance the impact of these reforms against maintaining the ongoing availability, quality and affordability of advice. Therefore, the Government intends to legislate to provide additional time for existing advisers to meet new qualification and examination requirements set by FASEA.

Under the new requirements, advisers who were registered on the Financial Adviser Register on 1 January 2019 must:

  • complete the FASEA-approved exam by 1 January 2022 (one additional year); and
  • meet FASEA's qualification requirements by 1 January 2026 (two additional years).

These changes will not apply to new advisers registered after 1 January 2019.

Currently the exam is only available in capital cities, and will not be available in regional areas until September 2019. The extension of the exam will ensure that all advisers, including rural and regional advisers, will have two years to sit the exam, as originally intended. The extension of the qualification requirements will assist working parents, including those taking parental leave during the transition period, to have sufficient time to meet the requirements, maintaining a diverse adviser industry.

Ultimately, strengthening the financial adviser sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions.

Further details on the professional standards for financial advisers are available on the FASEA website.