On 23 November 2016, the government introduced the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 (Bill) to raise the professional standards for financial advisers.
The Bill was introduced as part of the government’s response to the Financial System Inquiry on 20 October 2015, which identified examples of unethical and inappropriate financial advice.
Currently, the Corporations Act imposes a general obligation on licensees to ensure that representatives are adequately trained and competent to provide financial services. ASIC’s Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146) sets out the minimum knowledge, skills and education standards for financial advisers including:
- completing Australian Qualifications Framework level 5 (‘Diploma’ level) course units in relation to providing personal advice on relevant financial products;
- specialist knowledge requirements about the specific products advised on, and the markets in which they operate; and
- generic knowledge requirements, including training on the economic environment, the operation of financial markets and financial products.
Concerns were raised over the consistency of the application of these existing minimum education and training standards across the industry, and the rigour and quality of some training courses.
The Bill implements the following requirements for licensees, authorised representatives of licensees, employees of licensees, directors of licensees, and employees or directors of related bodies corporate of licensees, who provide personal advice to retail clients in relation to certain financial products (Providers):
- from 1 January 2019, all new Providers must hold a degree (or higher or equivalent qualifications), pass an approved exam, and undertake at least a year of work and training (Professional Year) before they can be authorised to provide financial advice;
- from 1 January 2019, all Providers must comply with ongoing obligations including meeting the Continuous Professional Development requirements;
- from 1 January 2020, all Providers must comply with an industry-wide code of ethics;
- from 1 January 2021, existing Providers who are registered at any time between 1 January 2016 and 1 January 2019 (Existing Providers) must pass an approved exam;
- from 1 January 2024, Existing Providers must meet the degree requirements; and
- Existing Providers are not required to complete a Professional Year.
The Bill has had its Second Reading moved and is yet to pass the lower house.