Building upon the professional standards reforms that came into effect on 1 January 2019, which aim to lift the education, training and ethical standards in the financial advice industry, ASIC is proposing to impose corresponding competency requirements on the responsible managers of Australian financial services (AFS) licensees that provide personal advice to retail investors on complex financial products.
The new professional standards apply to all financial advisers who provide personal advice to retail clients on financial products other than basic banking products, general insurance products and consumer credit insurance (or a combination of the foregoing) (Advice Licensees).
At the AFS licensee level, the professional standards apply automatically to individuals with AFS licences, but not to the responsible managers of AFS licensees that are corporations, partnerships or groups of trustees (unless they are themselves financial advisers).
This creates a potentially unacceptable incongruity in the level of competency within a financial services firm where responsible managers are the persons who decide how financial services are to be provided and who supervise the provision of those services, even if they may not actually provide the financial services on the AFS licensee’s behalf.
As such, ASIC is proposing to:
- amend its training standards in ASIC Regulatory Guide 146 to introduce a new “Option 6” that reflects the new education and training standards for financial advisers; and
- require that Advice Licensees demonstrate that they have the appropriate knowledge and skill for their role by having at least one responsible manager who satisfies new Option 6.
To become a financial adviser from 1 January 2019, an individual must:
- complete a bachelor degree (or higher) approved by the Financial Adviser Standards and Ethics Authority; and
- complete a professional year of supervised experience; and
- complete a financial adviser exam.
This means that the ASIC Regulatory Guide 146 diploma level studies will no longer be recognised towards becoming a financial adviser.1
If ASIC adopts its proposed changes to ASIC Regulatory Guide 146, then at least one responsible manager of an Advice Licensee will need to meet the above professional standards and satisfy the continuing professional development requirements.
Both new and existing responsible managers who wish or are required to satisfy the new Option 6 will have until 1 January 2021 to pass the exam and until 1 January 2024 to satisfy the degree requirement.
Absent any changes made by ASIC, the current diploma level requirements in ASIC Regulatory Guide 146 would be the only standards that apply in assessing whether the responsible managers of a corporate Advice Licensee demonstrates the requisite competence.
1. https://www.cpaaustralia.com.au/professional-resources/financial-planning/professional-standards.
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