Following a number of changes over the past few years, it is understandable that many advisers are confused as to the current status of their training and qualification requirements. We summarise where things currently stand.
Financial advisers providing personal advice to retail clients in relation to 'relevant financial products' are required to:
- hold an approved tertiary level qualification;
- pass an exam;
- undertake Continuing Professional Development (CPD); and
- comply with the Financial Planners and Advisers Code of Ethics 2019.
Note: 'relevant financial products' are financial products other than basic banking products, general insurance products, and consumer credit insurance: see section 910A of the Corporations Act 2001.
All new financial advisers are also required to undertake a year of professional work experience that includes 1500 hours of work activities and 100 hours of structured training.
Qualification
Existing financial advisers (any person who provided personal advice to retail clients between 1 January 2016 and 1 January 2019 and is not banned or disqualified by ASIC) are required to hold a bachelor's degree or approved equivalent by 1 January 2026. A list of approved tertiary qualifications is available in Schedule 1 of this document. Depending on an adviser's current qualification, they may only be required to complete a bridging course.
New financial advisers are required to meet the minimum education requirement of an approved bachelor's degree, comprising 24 subjects or more.
AFS licensees must ensure the Financial Advisers Register includes all relevant qualifications held by the adviser. Further information is available at the Treasury's Financial Adviser Standards website.
Exam
All new and existing financial advisers must pass an exam. The exam tests three competency areas:
- regulatory and legal requirements relevant to the provision of
financial advice, including obligations under:
- Chapter 7 of the Corporations Act 2001;
- the Anti-Money Laundering and Counter-Terrorism Financing Act 2006;
- the Privacy Act 1988; and
- the Tax Agent Services Act 2009;
- the construction of financial advice, including:
- suitability of advice aligned to different consumer groups; and
- incorporating consumer behaviour and decision making; and
- applied ethical and professional reasoning and communication.
ASIC is responsible for administering the exam. Further information can be found on ASIC's website. AFS licensees must ensure the Financial Advisers Register is updated upon the financial adviser completing the exam.
CPD
Since January 2019, financial advisers have been required to complete 40 hours of CPD per year in order to maintain and extend their knowledge and skills. 70% of these hours must be approved by the AFS licensee. Minimum hours of certain categories are also mandated under the Corporations (Relevant Providers Continuing Professional Development Standard) Determination 2018 (CPD Determination), as outlined below.
|
Category |
Mandated Hours |
Purpose |
|
Technical competence |
5 hours |
Designed to enhance an adviser's technical proficiency and ability to develop and provide advice strategies that are appropriate to the objectives, financial situations and needs of various retail clients |
|
Client Care and Practice |
5 hours |
Designed to enhance an adviser's ability to act as a client-centric practitioner |
|
Regulatory Compliance and Consumer Protection |
5 hours |
Designed to enhance an adviser's understanding of applicable legal obligations and how to comply with them |
|
Professionalism and Ethics |
9 hours |
Designed to enhance an adviser's capacity to act as an ethical professional |
Qualified tax providers must also complete an additional 5 CPD hours per year to maintain their capabilities to provide tax (financial) advice services.
The CPD Determination also requires advisers to maintain appropriate records of the training they have completed, as directed by their AFS licensee.
Code of Ethics
The Financial Planners and Advisers Code of Ethics 2019 was developed to ensure higher standards of behaviour and professionalism and includes 12 ethical standards for advisers to meet, including:
- acting:
- in accordance with applicable laws
- in the best interests of the client
- with integrity
- with competence and in good faith
- refraining to act where the adviser has a conflict of interest
- ensuring the client understands the advice, benefits, costs and risks of the various products recommended by the adviser
- obtaining client consent to all benefits received by the adviser or their licensee in connection with the advice
- record keeping
- cooperation with peers and promotion of ethical standards
New Advisers - Professional Year
Since January 2019, all new advisers have been required to undertake a professional year of 1600 hours, including 100 hours of structured training. The professional year must be supervised by an adviser with at least 2 years' experience working as an adviser. The supervisor is responsible for ensuring appropriate supervision is provided and making various resources and opportunities available to the new adviser.
The professional year is divided into quarters:
|
Quarter 1 |
Client Observations and support to Supervisor/Experienced Adviser |
|
Quarter 2 |
Supervised Client Engagement and Advice Preparation |
|
Quarter 3 and 4 |
Indirect Supervision of Client Engagement and Advice Preparation |
Structured training can include formal study that is undertaken by the new adviser - for instance a bridging course in relation to the Code of Ethics. Other structured training can include:
- Education for the purposes of achieving a professional designation;
- Education for the purposes of accreditation in specific forms of financial products; or
- Education for the purposes of meeting more detailed requirements in specific financial advice provision (e.g. SMSF, stockbroking, aged care etc).
New advisers and their supervisors are required to keep a log book of work activities and structured training completed over the course of the professional year. Further information is available on the Treasury's website.
Steps towards Compliance
In order to ensure compliance with the regime, all AFS licensees which provide personal advice to retail clients should:
- review existing financial advisers' qualifications to identify any need to complete additional courses to meet the new education requirements by 1 January 2026;
- review existing Training Policies and/or HR Policies regarding ongoing professional training and supervision of financial advisers;
- work with existing financial advisers regarding pathways to upgrade existing qualifications. After 1 January 2026, financial advisers without an appropriate qualification will be required to cease working as a financial adviser;
- review overall compliance frameworks in light of the Financial Planners and Advisers Code of Ethics 2019; and
- where new advisers are being appointed, ensure appropriate
steps are undertaken to:
- appoint a supervisor
- make appropriate resources and opportunities available
- ensure records are kept.
Sophie Grace can assist you with implementing plans to comply with the new regime, as well as developing a compliance framework which captures the key components professional standards regime.
Background
In 2017, the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 introduced a range of reforms in relation to the education, training and ethical standards of financial advisers. Since 1 January 2019, the professional standards and training obligations have applied to financial advisers who provide personal advice to retail clients.
In 2021, the Financial Sector Reform (Hayne Royal Commission Response - Better Advice) Act 2021 transferred the oversight and implementation of functions relating to the reforms to the Minister and ASIC.
Further Reading
Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2021
