Advisers Support Risk Carve-Out

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

Three in four advisers support a separate classification for risk advice when it comes to their minimum education requirements.

As we indicated last week – there’s not a right or a wrong answer to this question. In the end, it comes down to which future you prefer, or at least envisage:

Future Scenario 1 – Apples AND Oranges:

Every authorised representative is required to achieve the same or equivalent qualifications, regardless of the nature of their advice proposition. This is an easier package to take to the public in the quest to restore and build trust in the value and quality of personal advice. This future would see the decline of the stand-alone risk advice business and is the most likely outcome.

This scenario declares there’s little-to-no difference between apples and oranges.

Future Scenario 2 – Apples OR Oranges:

Minimum education standards are revised for risk-focussed advisers, so they are not required to attain a degree or equivalent-level qualification in order to advise on life insurance. Specialist risk advisers would qualify for a licence that would limit the scope of their advice to general and risk-only. Naturally, Scenario 1 will always be open to the risk specialist who would prefer to advise across the broader spectrum, but at least Scenario 2 offers a choice.

This may be a harder ‘sell’ to the public, but would allow thousands more small advice businesses to remain viable and allow those advisers to continue in their capacity as risk specialists. In all probability, it would allow more Australians, especially more ‘mums and dads’ clients, to access the advice and support so many of them desperately need.

Other Scenarios:

There are other scenarios as well, because – as is often the case – nothing is quite that simple. For example, there’s a body of opinion which holds that because life insurance advice is so frequently linked with superannuation structures, qualification for this separate, restricted licence, would require the adviser to also achieve minimum competency across superannuation as well as risk.

We think this would work, too. But where and how does FASEA draw that line? It’s not easy.

Other Industries:

One of the consistent messages being sent to FASEA relates to what many advisers perceive as appropriate analogies from other sectors. For example, one adviser made the comparison with medical specialists, noting that an ophthalmologist doesn’t need to know how to perform a knee replacement to help their patient with their eyesight. Another commented that in the building trade, plumbers don’t need to qualify as carpenters, plasterers or bricklayers in order to be able to work onsite to build a house.

…plumbers don’t need to qualify as carpenters …to be able to work onsite to build a house

FASEA’s requirement, that every financial adviser must in future hold a relevant degree qualification or its equivalent, is a blunt instrument. It’s an ideal requirement in an ideal world. But we don’t live in an ideal world.

As challenging as it may be from a political perspective, the solution that will, in all probability, see better quality advice delivered by more advisers to more Australians is a solution that makes exceptions – a solution that acknowledges the difference between apples and oranges. Risk advice is one of those exceptions.

While this debate may be somewhat academic, given the existing FASEA education requirements have already been legislated, our poll remains open for another week and we encourage you to have your say…

  • Simple solution

    The carve out for risk specialist should be they must do the exam on ethics and have the diploma of financial planning that would be more than sufficient and could be done in their own time. Most fisk advisers would have 1 to 4 as minimum so just get them to do the balance and allow them to to provide insurance advice only. If what to do investments then need to do the degree as per FASEA.

    Pretty simple and fair to all.

    • Concerned

      Simple Solution – I am a risk specialist and I completed the TAL FASEA Masterclass – full marks to TAL for this program and their desire to help advisers. I don’t know if you are aware, but TAL had us complete trial questions throughout their class and some questions did relate to planning (retirement planning, investments). Although the entire exam is about ethics, I did struggle with those questions on planning simply because I did not understand the concept of each. Whereas I did not have a problem with those questions focused on Risk because I understood the concept behind the question. TAL stated that the FASEA exam will be more difficult than what TAL presented in their training. This is why there should be a carve out for risk specialists.

      • Concerned adviser

        I am a Risk specialist & I did the TAL masterclass as well as the BT practice exam. I sat the 19th of sept the real exam and trust me it is so much harder than TAL & BT it is not funny. all I can say is good luck and unless you are an academic Id say you will be spending a lot of money resitting the exam. I reckon there was 1 question relating to risk

        • emkay

          well that just filled me with confidence…..

        • Ken

          Did you pass ??

        • Squeaky_1

          Yep, and this is the reason why I refuse to do ANY of these upcoming exams. Irrelevant and fully inappropriate for risk advisers. The degree of difficulty mentioned above JUST for the ‘ethics’ exam is preposterous and totally out of step with reality. It will not help a single client – it will help a lot of special interest groups and politicians improve their image though! It will time nicely with selling my business and exiting the industry . . . about 15 years earlier than I had planned. I consider myself a ‘good’ risk adviser, 33 years now and never had a client complaint , clients love me and I them. These pin-head academics don’t care about what clients want or if their trusted advisers will be forced from the industry. They only want strong-sound bites, magazine column space and to be seen ‘doing’ something to protect clients from these horrible advisers who scam, cheat and rip them off. Too sad for words. Yep, I’m being forced out 15 years early but I’m here to say I absolutely can’t wait to put this stress and mess behind me, ride my motor bike and muscle car each day instead of constantly having prove myself to academics for THEIR self interested reasons. Ha! How about an ethics exam carve out for advisers that have already proven their ethics over 3 or more decades?! Stupid, stupid academics and politicians – are they really so different to each other?

          • bigal

            I am an ex adviser and spent the final 25 years of my working life in the industry and totally agree with all your comments.
            Yes it had it’s good moments especially when a nice cheque was sent to a client in financial distress or difficulty due to an injury or sickness.
            But sadly I saw a gradual decline in economic viability of the business and a huge increase in compliance nonsense.
            ASIC was only after the small fish, they were easy to fry but the biggies and we now know who they are, got away with murder so to speak.,
            So my exit was perfectly timed about 4 years ago and I sold my business in my early sixties and now retirement is bliss.
            I am busy as ever with no stress and enjoying life while I am healthy.
            So to you all out there, if you can afford it, just get out and retire, life is too short!

          • Squeaky_1

            Well done and timed. I’m impressed and jealous! All the very best to you Bigal, for your fun stress-free years ahead. I’ll be there soon, God willing!

  • Chris Lucas

    Firstly, I am a risk adviser.
    I just don’t see how this is workable. Risk isn’t a completely stand alone ,you need a good understanding of other aspects of financial planning to be able to deliver sound risk advice. It’s a discipline of, not a stand alone function to fin planning.
    It would be the equivalent of a tax lawyer only studying tax law and ignoring all other aspects of law, it wouldn’t work.

    • Squeaky_1

      Well Chris, you go ahead then and spend $10K+ and a hundred or more hours away from family and clients on getting qualified for all those other things. Let us know how you get on with that. Meanwhile, if it be God’s will, the rest of us risk advisers will be out there with a single, relevant and more appropriate qualification that actually puts us to the test as to whether we can advise clients on their risk needs. A brain surgeon doesn’t need to know how to fix a broken leg to be a qualified brain surgeon. Common sense really – maybe that’s why so many find this all so hard to understand . . . .

      • Chris Lucas

        Ahhh, but squeaky , a brain surgeon does know how to fix a broken leg.

        • Squeaky_1

          Haha! OK, got me there, bad example. I should have drawn the analogy of a brain surgeon not knowing how to mend a torn aorta, as a qualified heart surgeon would. Touche!

          • Chris Lucas

            Squeaky, I agree that The way FASEA is being implemented is an absolute disgrace, the skills and experience that are going to be lost due to it will only be to the detriment of those it is meant to be protecting, the consumer.
            What I don’t want to see happening is the creation of an advice “ under class” if you carve risk advise out of financial planning, we will just be seen as “ white shoe insurance sales people”

          • Squeaky_1

            Sure Chris, but the thing the pin-head academics, politicians, FARCIA nuts and special interest groups don’t grasp are the concepts of ‘appropriate’ and ‘reasonable’ and ‘relevant’. I fully understand a riskie should have a sound knowledge of super – insurance is intermingled with it. Similarly other general economic and financial terms and concepts, with which Kaplan teaches us well in a broad way and a working knowledge of these is important, you are correct. BUT – to have riskies spend ultimate thousands of dollars (probably over $10K+) and stress and Lord knows how many dozen hours away from family BECAUSE they have to sit an ethics exam (ludicrous, don’t start me!) AND a FULL financial planning exam is beyond – far beyond – a relevant or appropriate solution for riskies.
            .
            Think about it. Complex calculations, detailed estate planning and the nano-level, bare-metal understanding of extraneous subjects as complex derivatives, international bond markets and their interplay with other markets, contracts for difference, international currency exchange, case studies on pensions/aged care and the myriad other stuff totally unnecessary to the everyday helping of clients to have their insurance in order. It is, beyond question, a separate discipline to advising on academic style investment sales (YES, sales). People WANT to see you to invest their money, they see short, medium and long term profit in it for themselves. Insurance clients STILL need do be SOLD (there’s that word again!), in the main, as it is a grudge purchase. Most financial planners don’t want to touch it and THAT isn’t in the client best interest! It is a travesty that riskies are being forced to suffer all of the above for zero reasons.
            .
            Sure, a limited, generalist and relevant exam for riskies, I think we’d all appreciate that to add to our professionalism – but not this full-blown financial planning uni degree, that’s just a knee-jerk over reaction from, frankly, jerks. So, for all these reasons – I’m out.

  • Jeremy Wright

    All the intellectual debate means nil if there is a mass exodus of experienced risk advisers.

    It does not matter what people think is important, if the consequence of those thoughts, brings to reality, the disaster the Retail Life Insurance Industry faces, if FASEA continues on it’s current trajectory.

    There will be either a carve out, or a collapse and eventual withdrawal of the Retail Life Industry in favour of inferior quality, expensive rubbish that does not have any BID interests for Australians.

    For all those “experts” who continue to push ridiculous ideologies, like the fee for service scam that was never going to work, though was pushed aggressively by Life Companies, vested interest entities and left wing theorists, may I suggest you try a strategy of first understanding the topic, gain some practical experience and start listening to what is being explained to you by people that actually do understand the full implications of future actions.

    • Squeaky_1

      Beautiful Jeremy, just superb. You’ve summed it all up perfectly as usual. I feel I should help you qualify one of those statements though – you are of course referencing the “fee for service scam” as applies to RISK advice only, I take it.

  • Just About Done Now

    Great article firstly! I’m really pleased to finally see some ground swell to this common sense approach for risk advisers now surfacing and love the alternative industry comparisons to demonstrate the point because they make sense.

    I don’t see too many positives coming out of a ‘one size fits all’ education standard solution for Aussies or the industry; the only people that stand to really benefit from that are the education bodies trying to make a quick buck out of a situation that should never have occurred in the first place.

    The signs are everywhere that what’s happening to this industry are dire…it’s about time the pollies started taking notice before it’s too late. Carving out a specialist risk / super education standard is an extremely positive move towards that…

  • Soobaman

    Without wanting to be too picky the question was should the government consider developing a special classification rather than necessarily developing a special classification for risk advice. This may or may not have swayed the response one way or another.

    • Concerned

      I don’t understand your point. The question specifically includes the wording “…consider developing a special classification for risk advice?” Risk advice means just that – risk advice.

  • Squeaky_1

    There is no such thing technically, as far as I’m concerned, as a ‘Financial Adviser’. It is as meaningful (or meaningless) as saying ‘doctor’ – what sort? There are a dozen or more AND each one has its own qualification!! Technically speaking (and practically speaking) there are INVESTMENT advisers, AGED CARE advisers, SMSF advisers and RISK advisers. There should be a MODULE or qualification for each. Inappropriate and patently ridiculous waste of time and money for each to study and be fully qualified for the knowledge of the other. A neurosurgeon doesn’t get qualified as an orthopedic surgeon, an ENT specialist doesn’t get qualified as a brain surgeon. A plumber doesn’t have to do an electician qualification and so on. What part of this common sense approach is not understood by these pin head academics, politicians and special interest groups controlling this unfortunate mess? I bet the broader population understands and see the sense in argument such as this..