Over the past few months, I’ve sat in a lot of meetings with advisers and industry experts regarding the future of our industry and the challenges we face, especially this year. So I thought I’d take this opportunity to give you some insight into what’s really going on.
It’s fair to say that the 2017 Hayne Royal Commission has had a profound impact on the industry. Its recommendations have caused financial advisers who wish to remain in the industry to take on an enormous compliance load, and it’s sparked an exodus of those who refuse to do the work.
That’s both a good thing and a bad thing.
It’s good because it should have Hayne’s intended effect of tightening everything up and ensuring more ethical practice across the industry.
The reality though, is that it’s driven a lot of people out of the business. Prior to the Royal Commission there were 30,000 financial advisers across the country. At the moment the number sits just above 20,000 and experts are predicting there’ll be as few as 10,000 who remain in the industry beyond this year.
What’s driving advisers out? For the most part it’s compliance requirements. In a lot of cases, compliance has become so burdensome that some see it as not worth the effort.
Take my recent experience, for example. Despite being an adviser since 1997, a CFP since 2000, and holding a Bachelor of Business, Diploma of Financial Planning and an Advanced Diploma in Finance, plus completing more than 60 hours of professional development each year, there’s even more that I’ve had to do in order to meet the new compliance requirements.
This includes a unit on Ethics and Professionalism in Financial Advice, which included two assignments and a 3-hour exam. I estimate the study for this alone took 70 hours. (I passed comfortably, for the record!)
Next, I need to pass the 3-hour FASEA (Financial Adviser Standards and Ethics Authority) exam in July, which has a pass rate of about 70%. In fact, every single financial adviser needs to pass this exam by 31 December or they’ll lose their financial advice license.
There are many in the industry who haven’t sat an exam since uni, and some are just flat-out refusing to sit these ones. Their businesses are up for sale and their staff potentially out of a job.
For others, this compliance load has caused massive stress and anxiety on top of what has been the hardest year many of us have ever faced.
Ultimately though, this compliance was introduced in 2017 to set the education, training, and ethical standards of licensed financial advisers in Australia. In short, its goal is to make the industry a profession, which it’s not – yet.
Now, I’m certainly not sharing this in search of sympathy. Instead, it’s to let you know that if you have a financial adviser, whether it’s me or not, you can rest assured that if they’re still in the business after the end of this year, they’re committed, qualified and passionate about providing you the level of service and advice that’s now expected across the industry.
To those who have stuck by us throughout this turbulent period of compliance, COVID and transition to a new licensee, thank you. Thanks also to Leah and Ajla for helping me through!
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