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Accounting, Education

Limited AFSLs may be caught by full FASEA regime

The Financial Adviser Standards and Ethics Authority’s (FASEA) new education and training standards paint a challenging picture for practitioners, particularly those who provide predominantly SMSF advice under a limited licence, an industry executive has said.

According to wealthdigital technical manager Rob Lavery, it is looking more and more unlikely advisers under limited Australian financial services licences (AFSL) will avoid the full suite of training and education requirements.

“Unlike RG 146, the standards enforced by FASEA, as they currently appear, do not scale up and down according to your specialty or licence class,” Lavery said.

“FASEA’s proposed guidance on new qualifications pathways for existing advisers split requirements into three categories.

“Many accountants who provide limited advice on SMSFs will find themselves required to do a one or three-subject bridging course. Those who have been in the industry the longest may need to complete the full graduate diploma.”

Advisers with no or an unrelated bachelor or postgraduate degree will need to do a full graduate diploma.

Those with a related bachelor or postgraduate degree, such as accounting, will have a three-subject bridging course to complete.

Those with an approved planning degree, or a related bachelor degree and postgraduate qualification, will have a single subject on FASEA’s code of ethics to complete.

Lavery said the second part of the new standards will be the requirement to adhere to FASEA’s new code of ethics and will also pose challenges for limited licensees.

“FASEA’s draft code of ethics included provisions not common in other industry standards,” he said.

“The requirement to uphold and promote the ethical standards of the profession may require advisers to actively report on colleagues and associates they believe to be acting contrary to the code.

“Furthermore, all advisers, including those under limited AFSLs, will need to subscribe to a code monitoring body. Such a body will result in increased cost and regulatory requirements for those providing advice.”

Commenting on FASEA’s consultation paper on its proposed adviser exam, he noted 80 per cent of the exam will be on non-strategic areas.

“For the most part, the exam will focus on the Corporations Act rules, FASEA’s own code of ethics and the application of ethical thinking and behavioural finance,” he said.

“All advisers, including those under limited AFSLs, will need to pass each section and achieve an overall mark of 65 per cent or higher.

“The exam is proposed to be three to four hours, will be a mix of multiple choice and short answer questions, and will require significant preparation for all candidates. Existing advisers will have until 1 January 2021 to pass the exam.”

He said those providing advice under limited AFSLs will have to actively commit to maintaining that part of their business.

“They will be required to subscribe to a code monitoring body within 18 months, will need to have passed their adviser exam within two-and-a-half years and will need to meet the education standards by the start of 2024.”

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