October 7, 2019
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.
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.
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…