Minimum Education Standards for Risk Advice?

Should the Government and FASEA consider developing a special classification for risk advice?

Our latest poll is effectively asking you whether life insurance advice should be treated as a special case when it comes to minimum adviser education standards.

This is a question which does not have a right or a wrong answer. It’s more a question of who you are and what you think. It’s a conscience vote.

The prevailing (and mandated) approach to regaining trust in financial advice is manifested in FASEA’s adviser exam and in its minimum education standards, which must be successfully completed by all advisers by 1 January 2026, if the Government’s amendments are passed by the Senate (see: FASEA Extensions Confirmed).

There are compelling arguments – for compelling reasons – that can be made in support of an industry structure that will require every adviser on the ASIC register to undertake the same examination and to attain the same minimum education standards, irrespective of the nature of their advice proposition.

In an ideal world, no-one would contest this proposition. It makes so much sense, especially as it relates to restoring customer faith.

In the real world, however, many in the financial services community offer an alternative perspective. That perspective is based around a pragmatism which contends that stand-alone life insurance advice is indeed a different proposition.

The idea is that a different set of minimum education metrics should apply when it comes to delivering life insurance advice solutions – for risk specialists – but that if they seek to provide advice across a broader spectrum, they would be required to meet the currently-mandated FASEA standards.

A significant focus of this debate revolves around the notion of how advisers add value for their clients. When it comes to investment and superannuation advice, it’s entirely appropriate to argue that the quality of that advice should not be dependent on the rise and fall of the value of a client’s investment portfolio. It has more to do with the best advice (and wisdom) an adviser can deliver to their clients, given the individual adviser has little control over the vagaries of the stock markets.

…there’s a proviso …which presumes the consumer is prepared to pay the equivalent fee for life insurance advice as they are for their investment and superannuation advice

Does this ‘ideal’ logic also apply when it comes to life insurance advice? Yes, it does. But there’s a proviso applied to that logic, which presumes the consumer is prepared to pay the equivalent fee for life insurance advice as they are for their investment and superannuation advice. But they are not – and therein lies the crux of this issue.

The Government and FASEA’s position that every adviser – regardless of the nature of their advice proposition – should be treated the same, is both admirable and naive. It’s naive because they’ve not taken into account the fact that the consumer – who is the intended beneficiary of these reforms – does NOT value life insurance advice in the same way as they value investment and super advice.

Unintended consequences: will the current FASEA exam and minimum education standards spell the end for most risk-specialist advice businesses? And will less Australians (including many ‘mums and dads’ families who need it most) have access to quality life insurance advice/wisdom as a result?

Perhaps consumer attitudes towards the relative value of life insurance advice will evolve over time, when compared with how they perceive the value of their investment and superannuation advice. But the Australian community just hasn’t arrived there yet – and that’s the argument that supports the contention that minimum education standards for risk advice, at least for now, should be given the respect of individual consideration.

As usual, there’s a more nuanced conversation that exists beyond the blunt question we’re asking. But for the time being, we’ll hand the debate over to you and will report back next week…

  • Deeply concerned

    The situation we are in never had anything to do with insurance advice, and perversely I doubt it has much to do with financial advising per se either, it’s all to do with control of the $2.8 T superannuation pot… advisers are being caught in the cross hairs of an ideological battle. SEE YOUR LOCAL MEMBER – DO NOT GIVE UP, QUALITY INSURANCE ADVICE AND ADVOCACY IS IMPORTANT – Everyone involved has too much to loose.

  • Walker

    I can’t believe this keeps coming up. Unless a risk adviser operates completely outside of superannuation, then they must have the technical competency to provide advice in relation to superannuation, portfolio advice and importantly death benefit nominations in the context of a wider estate plan. Either that, or they must be able to refer their clients to someone suitably qualified (within their firm, or external). To suggest otherwise is grossly negligent. Trust me, the lawyers have identified inappropriate superannuation death benefit nominations as their next cash cow. Firms are being established solely for this purpose…

    • Old Fella

      Walker, I partly agree with you but also partly disagree with you. A specialist risk adviser needs to be up to speed with superannuation and estate laws & rules, but not necessarily on managed accounts, international markets or currency risks.

      By way of comparison, does an Ophthalmologist need to know how to do a knee replacement? The basic knowledge for any profession is always required, but specialisation means you don’t have to and cannot be expected to know everything.

      • Walker

        I wasn’t suggesting that level of complexity in relation to portfolio advice. A multi-manager, or a multi-asset index manager option which complements the client’s appetite for investment risk is what I had in mind. I also pointed out that if an adviser doesn’t have the requisite expertise, then they would need to refer to someone who is qualified. Just like the medical profession does. The Code of Ethics requires that advisers operate on this basis from 1 January 2020. Professionalism would dictate this as a requirement in the absence of the code of ethics regardless…

  • Jeremy Wright

    One argument says there are compelling reasons for all advisers, irrespective of what they advise on, should be forced to follow the same education requirements.

    That argument is akin to saying Communism is the only model that works, as everyone is equal.

    Nice in theory, though in the REAL world, it does not work.

    The REAL world is that thousands of the most experienced advisers WILL exit the Industry, unless there is a radical overhaul of the FASEA requirements.

    Putting thousands of experienced risk advisers in the same category as a relatively inexperienced adviser, or Investment Planner specialist and saying because the 10 to 40 year veteran does not have a degree, therefore cannot advise from a certain date if they do not have a certain bit of paper, is ludicrous, especially if the study has no bearing on the work they do.

  • Just About Done Now

    I’ve written to my local Federal MP and Senator Jane Hume (twice in the last fortnight – without any reply as yet I must say) about this very point and are pleased to see this topic now starting to gain some coverage, as its well overdue.

    Forcing risk only advisers to undertake hundreds or hours of study and spend tens of thousands of dollars on subject matter they have no desire or interest (or capacity in my case) to provide their clients advice on is akin to a plumber (who works in the construction industry) being suddenly informed by their industry body / government that despite their 10-20+ years of experience, now need to pass an exam and undertake study to become a carpenter, plasterer, bricklayer, painter and roof tiler!

    Like plumbers, we specialise in one area and have no interest in other areas of financial advice and as such, should not be forced to waste time and money on them.

    I begrudgingly agree with Super being included for ‘riskies’ but not complicated estate planning courses or other subjects. It just lacks any common sense; is unfair and is completely unreasonable.

  • Meike

    Much like other professions, we should have specialisations within ours with appropriate education and qualifications applicable. I’m a risk specialist – I don’t do any managed investment schemes and yet I have to do more CPD points on this topic than insurance! Similarly, an adviser who specialises in portfolio management probably doesn’t do a lot with personal insurance.
    A general understanding of super, risk profiles, insurance, estate planning etc is necessary for us all, but we should then be able to specialise with tailored, relevant education.

  • Wayno

    It continues to amaze me how all these “Risk Specialists” don’t believe that they should have to complete the required education. I think it is as simple as this……..anyone who wishes to be an authorised rep / advise clients must complete a minimum education requirement. From there to specialise / advise in any area would then require further education in that specific area. The issue we have is at the moment the minimum education requirement set by our friends at FASEA is a degree / degree equivalent. The question is whether the degree is unnecessarily too high or whether the bar should be set at DFP, ADFP etc etc. Then once this has been set & completed by ALL the adviser is to complete their own specialty area’s they wish to advise in.

    • Just About Done Now
      • Wayno

        Just About Done Now …..looks like you are done.
        Unless you change your mindset of
        “I begrudgingly agree with Super being included for ‘riskies’ but not complicated estate planning courses or other subjects. It just lacks any common sense; is unfair and is completely unreasonable.”
        You might as well start clearing your office out.

  • Anon

    The genuinely intriguing thing about the FASEA exam is that there is no justification advanced as to how this will bring about behavioural change with experienced advisers.
    As FPs, we are compelled to justify our advice, yet our ‘Masters’ can simply compel us to do their bidding.

  • Squeaky_1

    Good words Old fella and JADNow, I concur. Everyone here so far commenting, except ‘Wano’, seems to get this issue. I have been screaming about this exact issue for years on these pages, so it is heartening to see an article about it finally. Let’s hope it isn’t too late. I fear it may be but never give up hope. Wano and some others cannot get past the fact that we riskies bring another discipline to the table, one I fear many ‘investment planners’ lack. Riskies, generally, are able to SELL, yes SELL ourselves to our clients AND SELL the idea that risk protection may be a damn good idea to protect a family situation. The art of SELLING here is leveraged to save a family from an otherwise recalcitrant attitude from husband or wife that it would be money wasted and they don’t need it. I’ve always believed that the degree one ‘sells’ oneself and one’s ideas to others in life determines one’s success in life. Just ask Bill Gates or Steve Jobs or Richard Branson – they all concur. To a somewhat lesser degree than these luminaries I have also proven this for myself in my life. I have no doubt it is true yet most people cannot see it for their own life.
    .
    It is my contention that many ‘financial planners’ that have been around for decades (and even some newer ones) do not believe in ‘selling’ (and I mean selling yourself and ideas) for the benefit of that client who cannot see the benefit of life insurance/IP for their family. There are MANY clients out there that need the skills of an adviser to ‘sell’ them the idea that insurance is worthwhile.
    .
    Many financial planners do NOT have this skill and treat insurance as an add-on or afterthought. This is NOT client best interest. Unless a financial planner (that may only want to do investments) can change the mind of a recalcitrant client towards insurance (sell him on the idea) then that planner is being ineffective and dangerous to the client. Many planners do NOT have this skill and I feel comments like ‘Wano’ made here are indicative of a planner who doesn’t have confidence to do this. Many planners I’ve met (that don’t do risk) seem not to have the skills to SELL risk and that is why they sideline the idea and any talk about separate qualifications to recognize risk specialists.
    .
    Argue if you like, I’m up for it as I’ve had a gutful of this and have little patience for any more of this nonsense from regulators or other ‘investment planners’! We all fail or succeed in life based on our ability to SELL – use the word planners, NOT a dirty word – SELL ourselves and our ideas to others. There’s nothing underhanded or deceitful in professional SELLING, anymore than there is in professional investment planning. It is all down to the individual and his/her ethics. Good and bad in all professions, even legal believe it or not!
    .
    This includes SELLING life insurance. Life insurance is a concept and an idea. SELL it for the benefit of your client and stop being purely an academic about investments. This idiot HAYNE would think like many planners in that he would show the ideas and let the client decide (walk away) without HELPING the client decide. A good risk specialist would walk with the client until they understand and were believing of the importance of insurance – they had been SOLD on the true benefits for their family.

    • Jeremy Wright

      Never a truer word spoken. There is a light at the end of the tunnel.
      Hopefully, not a train.

      As New Business and adviser numbers continue to fall, the Life Companies may be forced to make a decision that will improve the outlook for Advisers and all Australians.

      There is too much data and proof available to show where the mistakes / deliberate ploys were made and once brought to the table, the Life Companies will react and start lobbying the Government to address the issues before they become a total embarrassment with further implications.

      • Squeaky_1

        When the life companies rally to reverse the 2 year responsibility that they rolled-over for, that’s when I’ll consider taking them seriously again and think about writing new business with them again. Until then they are the adversary of the thinking adviser and no better or worse than the FPA, AFA in terms of avdviser advocacy. Just disgusted with life companies et al. . .

        • Just About Done Now

          I became an innocent victim of that damn 2-year responsibility period today ol’ Squeaky one!

          I would have spent 18 hours putting a solution together for a young lass last year who’s minimum value policy so she could obtain AIA’s Vitality program to save hundreds of dollars in gym membership fees, went into force in mid-October. Today, she ‘s informed me that she’s off to Hong Kong shortly and as such, has now cancelled her policy from the end of this month. I’m now copping a 60% clawback after being engaged by her and spending all the time I did to help her achieve her goals – plus all the other expenses I incurred along the way.

          Who’s fault is this? Its definitely not mine…yet I’m the one who cops it up the back passage. Its the final straw today. I crossed the line of no return. I am done now.

          • Squeaky_1

            So sorry to hear re the chargeback. Would be interesting to hear what one of these life coy ‘execs’ would have to say directly to you on this situation. Lots of corporate dribble-speak no doubt. I don’t know how they can look any adviser in the eye after allowing this travesty to occur. THEY are in charge of how they pay us – not the damn industry bodies or authorities. None of anyone’s business but the life companies and advisers. Biggest scam the life coys have ever pulled on advisers, maybe even bigger than the 60% commissions.
            .
            I wonder if they really think RoboAdvice will save them when there’s not enough advisers left to sustain their thirst for new business? I’ll be gone from the game, I’m sure, when the first few collapse from this so I’ll simply pull up the popcorn carton and watch. I know I will still feel for the remaining advisers though.

    • Wayno

      Squeaky _1
      FYI, Whilst I do advise in superannuation, I would call myself more of a risk specialist as opposed to a superannuation specialist. What you are missing along with Just About Done Now is that I to do not agree with all the extra education requirements put upon us all either nor do I agree with most of Mr Haynes view in regards to the royal commission BUT once you start trying to carve out risk specialists to the rest where does it stop…..investment only specialists, brokers & I could go on & on. Like the Accountants of this world if you want to be an adviser of any sort there must be a base for EVERYONE to complete, then go off and complete what is needed. In all honesty most good risk advisers wouldn’t require any additional education……but there has to be a base qualification that everyone needs to be up to date with. And when I say that I believe it should be somewhere between RG146 / DFP & the degree. Personally I believe the degree for ALL existing advisers is too high no matter what you advise on now or in the future. I also believe one of the main reasons that the politicians will not budge is because we all can’t agree even within our own industry. The only way WE as a financial planning industry will win here is if WE all agree first which includes Accountants, Risk Specialists etc etc then hit the Government with some good hard facts & reasons. Unfortunately at the moment there are so many smaller groups of opinions where as we need to fight as one united group / industry.

      • Just About Done Now

        Thanks for clarifying your position Wayno. I’m not sure it CAN’T be done though (i.e. carving out specialist courses). If the construction industry can do it for plumbers, builders, plasterers, tilers etc., why can’t the financial services industry? The comparison is pretty easy to see for the bumbling bureaucrats and regulators – tradies do it with other tradies when they build a house, we can do it when servicing our clients.

  • Squeaky_1

    Hahahaha! Thanks muchly – I loved that movie. Leonardo ROCKS!