The industry awaits a decision on whether to extend FASEA deadlines for exam completion for all registered advisers (currently end 2020) and achievement of minimum educational standards (currently end 2024). Senator Jane Hume has confirmed that this legislation should be passed in this week’s sitting of Parliament. The draft legislation, already passed in the House of Representatives, has been listed as “non- controversial”, meaning both sides of politics agree it should pass.
Despite the FASEA extension legislation being generally supported by both the Government and the Labor Opposition, it is part of an omnibus bill which also includes arrangements around listed investment companies (LICs). Though the bill passed in the Lower House, the opposition attempted to amend some legislation not relating to the FASEA extension. Labor has signalled it would continue to pursue amendments to the bill in the Senate. This action could further stall the bill's passage and with it the FASEA extension.
The lack of certainty on the exam deadline has created substantial angst amongst advisers and licensees. As can be seen in our chart below, according to FASEA - 7,488 advisers have sat the exam and 86% or 6,408 passed over the last 11 months. The last exams were in February 2020 and those scheduled for April were cancelled. Pass rates have dropped consistently since the first exam, possibly because the most motivated and proactive engaged early on.
Another 16,000+ advisers still must sit the exam. Allowing for an average 15% failure rate on their first attempt, 2,400 advisers will require two attempts to pass. The four previous sittings have averaged 1,500 advisers each. Assuming the extension legislation is passed, there are likely to be another 8-10 exam sittings by end 2021. Even then, that would represent 1,800-2,000 advisers for each exam, representing a 20-30% increase per sitting.
At least the next exam sitting in June will be held remotely.
Conducting exams remotely eliminates the inconvenience of travel and, arguably, should allow for substantially higher participation rates. But right now, with the imminent passage of the legislation gifting advisers another 12 months of breathing space, compounded by the intensity of supporting clients through the pandemic, we are probably going to see a drop-off in participation rates for a while.
Anecdotally, advisers are frustrated by the lack of feedback from FASEA on their performance where they have not passed. Guidance is reportedly generic and does not help advisers know where to focus their re-learning efforts. The apparent ease of completing the exam on-line may also not be as straightforward as it first seems. There are specific conditions that advisers must meet to ensure they are appropriately “supervised”, including downloading proctor software and installing mirrors to show the proctor what is around the adviser’s computer. And for some, the vagaries of internet connectivity mean that technical disruptions of more than 30 minutes require the session to be rescheduled.
The impending deadline to complete the FASEA exam is a factor for advisers thinking about whether to remain in the industry. The difficulties of studying for exams while running an advice business has been compounded by the intensity of inquiry and client hand-holding at the moment from COVID-19. Interestingly, the academic qualifications and FASEA educational pathway requirements of advisers leaving the industry versus staying are largely the same. We have reported on this previously and little has changed, suggesting that the hype surrounding the FASEA educational requirements driving advisers out of the industry is overblown. Having said that, with this huge bottleneck looming to complete the exam before the end of 2020 the expected extension should see a collective sigh of relief from advisers who currently have several priorities to work through.
You can see more analysis from our newly released Musical Chairs report for Q1 2020 here