The government is considering giving more weight to years on-the-job in adviser standards. That might not be popular with those who have adjusted to the current rules – or potential clients.
Critics of the advice industry’s professional standards have long argued there’s little recognition of experience. The topic comes up perennially from associations, politicians and some advisers themselves.
Now, as the baton passes from the Financial Adviser Standards and Ethics Authority to the Minister for Financial Services, the debate about whether experience should be acknowledged in the standards is under way again.
In the final weeks of last year, Treasury released a policy paper asking whether the standards adequately account for on-the-job experience. It has now put forward an alternative standard to capture advisers who haven’t or won’t meet the current requirements.
Under the proposal, an adviser with 10 or more years’ full-time experience in the past 12 years would need to complete only a tertiary-level unit on the Code of Ethics by January 2026 to continue advising. In other words, an approved bachelor’s degree or graduate diploma would not be required for advisers who meet the other requirements.
What advisers think
In light of this, we asked our readers, “Should on-the-job training (or years of experience) be recognised for adviser education standards?”
Among more than 550 responses, a slight majority (56.4 per cent) were in favour of on-the-job training or experience being recognised, while the remainder (43.6 per cent) were not in favour.
Despite this support for a mechanism that recognises on-the-job skills, changes to the existing standards won’t be an easy sell, for a number of reasons.
First, we’ve seen tens of thousands of advisers either exit the market completely or invest in years of education to meet the new benchmark. Resuming practice in an industry after you’ve left and offloaded clients isn’t easy. Accommodations for on-the-job experience are likely to aggrieve these ex-advisers, as well as active advisers who have adapted to the current standards.
Second, despite the rapid decline in the adviser workforce, our data shows that today’s remaining advisers have higher quality scores than those who have departed – which has implications for the end client. Three-quarters of current advisers have at least an approved bachelor’s degree, which is unsurprising given the education standards deadlines. Meanwhile, more than a quarter have been in the industry for more than two decades.
The government proposal recognises that the advice workforce is declining rapidly and some former advisers may be lured back if the education requirement is reduced. However, the change may not win a lot of fans among those who have already completed the requirements or made the costly move out of advice in the past five years.