This will be another important year for the financial advice sector, which faces the serious work of implementing the reforms passed earlier this year. In some ways, passing the laws was the easy bit. Making sure the new arrangements work for the profession will be just as important.
Labor supported recent legislation to strengthen professional standards for financial advisers because we believe it will strengthen the profession, address some of the shortcomings in the quality of financial advice that has plagued the sector in recent times and weed out the poor and shonky operators. This has certainly been the experience when similar bodies have been established across other professional groups.
Under the new law, financial advisers will be required to hold a degree or equivalent qualification, undertake a professional year, pass an exam, undertake continuous professional development and comply with a code of ethics. There is an obligation on the Australian Financial Services licensee to ensure that advisers comply with the new education standards and are covered by a compliance scheme. The legislation protects the use of the terms ‘financial adviser’ and ‘financial planner’, in recognition of the unique skill set that providing financial advice requires.
The reforms include the recognition of a new standard-setting body that will detail the new education standards and develop a code of ethics for financial advisers. Labor will be watching the appointees to the board of the new standards body closely. This board will have a great deal of responsibility in setting the new degree requirements that financial advisers have to meet. Labor expects people of a high calibre with significant experience to be appointed to the board, to ensure that these new standards are set at a robust level.
I was pleased to see the support across industry and consumer groups for this legislation. These reforms have been a long time coming. It was back in May 2014 that the Financial Planning Association (FPA) released a white paper that put forward a plan to prepare the profession for higher professional standards. And it was in September 2014 that the Financial Services Council called for an independent body to have control of education and professional standards for financial advisers.
With the financial services industry firmly in the political and public spotlight, the challenge before the profession in building and maintaining public confidence is not insignificant and I am hopeful that these laws, supported by all sides of politics and the financial planning industry, will assist with meeting that challenge.
Keen to engage with sector
As the financial planning industry adapts to the changes to professionalise the industry and the financial costs that come with that, Labor is keen to engage with the sector on ways to ensure that personal financial advice is something that remains accessible and affordable for people. This is especially relevant for women and those on lower incomes, who we already know experience financial exclusion to a much greater degree than others and are arguably more in need of the specialist advice that financial planners can provide.
Since taking on the shadow minister for small business and financial services role, I have learnt a great deal about this incredibly important industry. I would like to thank everyone who has invested time and energy in bringing me up to speed on the major issues. In such a complex, changing and politically charged policy space, the expertise and advice that advisers and the FPA have given me in my first few months in the role has been invaluable.
I look forward to strengthening the relationship with financial advisers and their representative bodies in 2017.
This article first appeared in Professional Planner on March 16, 2017.