ASIC today released a consultation paper to seek views on a new training and assessment framework for financial advisers.

Consultation Paper 153 Licensing: Training and assessment framework for financial advisers (CP 153) contains proposals relating to the assessment and professional development of financial advisers of Tier 1 products.[1] It addresses issues identified in ASIC's review of the present training and assessment framework and seeks feedback to those proposals.

ASIC Commissioner Greg Medcraft said, ‘Our review identified concerns about current training standards and highlighted that change is required to increase consumer confidence in the financial advice industry and to encourage professionalism.

The proposed framework for assessment and professional development is designed to improve the quality of advice by ensuring that all financial advisers achieve a uniform minimum standard that is consistent with developments in the industry both here and overseas,’ he said.

ASIC proposes amending the assessment and professional development framework for financial advisers by requiring:

1. all new and existing financial advisers who provide Tier 1 financial advice to pass a Financial Services Competency Certification exam to ensure they have the requisite competencies to perform their role. (‘Entry Stage’);
2. all new financial advisers following Entry Stage to be supervised by a supervisor (who has at least 5 years experience in the industry) for a minimum period of 1 year full time or equivalent;
3. all financial advisers to undertake a Knowledge Update Review every three years on changes to laws, market issues and new products; and
4. ongoing continuing professional development requirements.

Feedback on CP 153 is requested by 1 June 2011.

Background

The minimum training standards for financial advisers are currently set out in Regulatory Guide 146 Licensing: Training financial product advisers (RG 146).

RG 146 provides guidance on how advisers can meet these training standards and sets out requirements for advisers who provide general and personal advice as well as classifying financial products into two categories, Tier 1 and Tier 2.

In its submissions to the Parliamentary Joint Committee (PJC) Inquiry into Financial Products and Services, ASIC advised that it was ‘reviewing RG 146 with a view to improving training standards and will put forward proposals for change in consultation with industry and other stakeholders’.[2] In its report released in November 2009 the PJC advised that ‘a considerable amount of evidence to the committee contended that the minimum training and qualifications for advisers should be raised’.[3]

The Government responded to the PJC recommendations in April 2010 with the Future of Financial Advice package of reforms for financial advice in Australia. One of the proposed reforms was to establish an Expert Advisory Panel to ‘… review professional standards in the financial advice industry, including conduct and competency standards, which may include a code of ethics for financial advisers’.

The Government established the Advisory Panel on Standards and Ethics for Financial Advisers in November 2010. Members of the panel agreed ASIC should consult on its proposed training and assessment framework.

ASIC also informally consulted a number of industry associations in 2010, which helped inform the development of the proposed framework.

Download:

• CP 153
• RG 146

Notes to release

1. Tier 1 - All financial products not listed as Tier 2 products.
   Tier 2 - General insurance products, consumer credit insurance, basic deposit products, non-cash payment products, First Home Saver Account (FHSA) deposit products. [Back to text]
2. Australian Securities and Investments Commission 'Submissions to the Parliamentary Joint Committee and Corporations and Financial Services’ inquiry into Financial Products and Services in Australia' 19 August 2009. [Back to text]
3. Ibid pg 129. [Back to text]