- Staff Reporter | May 29, 2018
The way financial planners are regulated has changed hugely in the last few years.
In order to ensure the financial advice Australians were receiving was of high quality, the federal government amended the Corporations Act in 2016 to increase the barriers to entry for financial planners, including tougher educational requirements, a code of ethics and a centralised governing body.
There are several big players you’ll need to know when it comes to the regulation of financial planners in Australia.
Financial Adviser Standards and Ethics AuthorityEstablished in 2017, the Financial Adviser Standards and Ethics Authority (FASEA) sets the education, training and ethical standards of licensed financial advisers in Australia.
FASEA is responsible for a raft of regulatory functions, including approving educational qualifications; creating, approving and administering the financial planning competency exam; determining the pathways for existing planners without approved qualifications to get qualified; determining the continuous professional development (CPD) requirements for financial planners under the new laws; setting the requirements for the professional year; and creating the financial planning code of ethics.
That’s a huge job, and as a fairly new entity, it’s not entirely known yet how the FASEA will work day today.
Australian Securities and Investments Commission
Any business who provides financial product advice to clients, or deals in a financial product is required under law to hold an Australian Financial Services (AFS) licence with ASIC.
ASIC assesses licence holders’ applications to determine whether they are competent to undertake the kind of financial services business specified (e.g. financial planning, SMSF management, insurance sales) and that they have enough financial resources to carry on the proposed business.
Licensees also have a long list of ongoing requirements in the areas of finances, management, competence, monitoring, training of financial product advisors, risk management, technology, human resources, conflicts of interest, licensing, dispute resolution, insurance and disclosures. Phew!
The ASIC licences are held by businesses, not financial planners, so you will be employed by an organisation with an existing licence. As a financial planner, however, you will be required to register your details on ASIC’s database, including your name, employer, qualifications and memberships. This database is searchable by the public and helps consumers choose a financial planner with confidence.
Professional bodiesThere are a number of professional industry bodies for financial planners in Australia, including the Financial Planning Association of Australia (which represents 13,000 members, including 8,000 currently practising financial planners) and the Association of Financial Advisers (with approximately 3,500 members).
These industry bodies provide a level of self-regulation, including a code of ethics for members and a requirement for continuous professional development.
Both the FPA and the AFA provide continuous professional development courses for their members. Under the current system, CPD is optional for financial planners but will become a mandatory part of maintaining your licence in the future.
Financial Planning Education CouncilCreated as an independent body by the Financial Planning Association of Australia, the Financial Planning Education Council (FPEC) works to raise the standard of financial planning education and promoting financial planning as a distinct learning area and a career of choice. It sets the standards for accreditation of university courses and provides industry support to academia, including support for academic research.
It’s likely that you won’t come into contact with the FPEC during your career as a financial planner, but you will benefit from their work on improving the educational standards for the industry.