Association of Financial Advisers (AFA) chief executive Phil Anderson believes this is a year may finally be one of positive change.
“We’re out there seeing things that are going to make it easier for advisers to provide quality advice to their clients, and I’m positive about what the future will look like,” he explained.
“We have to keep working with the minister to ensure these changes happen and we all have a role to play in making sure that happens.”
Addressing delegates at the AFA THRIVE Conference on the Gold Coast, Anderson highlighted the educational standards and said the surrounding debate has probably been the “hottest” seen for quite some time.
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“It’s fairly and evenly divided, lots of people are opposed to giving greater recognition or so much recognition that has been proposed,” he said.
He said three exams have been run so far this year and conceded that the results haven’t been great.
“During the course of those three exams, 1457 candidates sat the exam and 648 passed. That pass rate has been concerningly low,” he said.
He added the percentage in pass rate for new entrants was much higher than the pass rate for existing advisers.
“We can work out how many new entrants have passed the exam over the course of this year, and there is at least 270 based upon what ASIC has told us and what FASEA told us last year, which means around 380 existing advisers have passed the exam,” he said.
He said ASIC advised earlier this year that 882 advisers qualified for the extension.
“By natural deduction, that means around 500 of them have not been able to pass and will be forced to leave the financial adviser profession at the end of this month,” he explained.
He pointed out that not passing the exam does not mean the adviser isn’t good and highlighted the level to do so is a credit and quite high.
“Some of our friends from the west have relationships with senators, and one of those senators asked a question of FASEA after the main exam last year,” he said.
“That indicated that of the people who had failed to that point more than 50% of them had got between a 50% pass rate and the dreaded pass requirement. So, it didn’t mean they didn’t know their stuff. It meant that they just didn’t quite get enough.”
He reinforced that ASIC has recently explained there is an option for those 500 or so advisers who didn’t pass.
“This is in the legislation – if the adviser who doesn’t pass chooses to get off the Financial Adviser Register before September 30, they will then have the chance to sit the exam at a later point,” he said.
“Should they pass at a later point, they can come back onto the register without having done the full undergraduate degree or the professional year and continue as an adviser.”
Anderson makes it clear that there are almost no guarantees, and the exam will not be held as frequently going forward.
“The other major challenge is that they need to find a solution to service their clients in the meantime. One option is to sell their businesses,” he said.
Anderson said it’s been a very challenging situation and called on everyone to be kind and empathetic with colleagues who are impacted.
“What does it mean for adviser numbers, when this 500 come off the register by the end of this month? As we go into next month, we’re likely to see a number of around 15,800,” he estimated.
But he said there is still reason to be optimistic that things could turn around.
“The proposed changes to the educational stuff may do two things; it may help to hold on to more quality existing advisors. But it may also be a vehicle to get more new entrants into the profession,” he said.
“Also, the Quality of Advice Review, if it changes the underlying economic fundamentals of being an adviser to make it more profitable, may give more incentive for more to stay.”
He concluded that he is enthusiastic about the review and said there hasn’t been anyone as active in consultation as Michelle Levy.