Advice / APAC / Consumers/retail / Global / Insights

New standards costing advisers time and money, but the public is onboard

The introduction of new education, professional and ethical standards for financial advisers has proven to be both costly and disruptive for financial advices and advice businesses. But new research by CoreData suggests the standards are well on track towards meeting their intended aims of improving public trust and confidence in financial advice and lifting the likely take-up of financial advice.

CoreData’s Q3 2020 Adviser Pulse Check Survey has found that around 60 per cent of advisers have already sat the Financial Adviser Standards and Ethics Authority (FASEA) exam, and that about 85 per cent of those advisers have passed. Another 11 per cent say it was “too early to tell”, suggesting they’ll either resit the exam, or are awaiting results.

About half (49.5 per cent) of the advisers who’ve sat the exam rate the content as somewhat or very reasonable – meaning that around half think its content is somewhat or very unreasonable. Even so, about 65 per cent of advisers who passed the exam rated its difficulty as very or somewhat reasonable.

For the greatest proportion (26.9 per cent) of advisers, the cost of studying, including lost earnings, while preparing for the exam has been less than $1000. But for around one in five (18.7 per cent) it’s been between $2000 and $2500, and for around one in five (21.4 per cent) it’s been $5000 or more – including almost one in 10 ( 8.8 per cent) who say the cost has exceeded $10,000.

The time committed to studying for the exam ranges from less than 10 hours to more than 40 hours, with the greatest number of advisers (29.1 per cent) spending 10 to 20 hours studying, and a similar proportion (27.5 per cent) spending 20 to 30 hours.

Most advisers are also spending time discussing the FASEA standards with their clients, with around 14 per cent having already discussed them with all clients and getting on for half (45.7 per cent) of all advisers having discussed them with at least some clients. Around three in 10 (29.1 per cent) advisers say they do not intend to discuss the standards with clients at all, and the rest plan to discuss the standards at some point.

The results suggest that for some advisers there’s been a significant commitment of both time and money to preparing for and sitting (and passing) the exam. We’re currently analysing whether an adviser’s experience (measured by years in the industry) or size of the practice they work in (potentially as a proxy for the resources available to support them) has a bearing on the combined time/cost impost.

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But the time and the costs appear to be warranted, at least in terms of the FASEA education standards hitting the mark with the people who matter, namely, consumers.

CoreData’s Q3 2020 Trust Survey shows that fewer than four in 10 (36.4 per cent) consumers currently regard financial advisers to be “professionals” in the same way they regard doctors, lawyers, accountants, actuaries, engineers and others. But almost nine in 10 (86.6 per cent) of consumers think financial advisers should be held to the same standards of professional behaviour, ethics and educational qualifications as those other professions.

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New entrants to the advice industry are expected by more than a third (35.4 per cent) of consumers to hold a financial planning degree; and slightly fewer (29.6 per cent) expect a new entrant to hold a degree relevant to financial planning. Most (92.9 per cent) consumers think a professional year, similar to other professions, is appropriate for new entrants.

The expectations are slightly different for existing advisers: a third of consumers (33.2 per cent) think a financial planning degree is appropriate but slightly more (36.4 per cent) think a degree related to financial planning is OK. And three-quarters (75.7 per cent) of consumers believe a January 1, 2026, deadline to get that qualification is appropriate.

For all advisers, a commitment to continuing professional development is a given among consumers, with nine in 10 (90.3 per cent) saying advisers should be required to keep their professional knowledge and qualifications up to date – although there’s less certainty about how many hours each year are appropriate, with around three in 10 (28.2 per cent) consumers saying they don’t know.

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Overall, the FASEA standards appear to be meeting their intended objectives. As a result of the key education measures in combination – a bachelor’s degree or equivalent, or higher, qualification; passing the exam; and minimum CPD requirements – more than one in four (27.0 per cent) of consumers say they would be much more likely to seek financial advice. And more than four in 10 (41.7 per cent) say they’d be somewhat more likely to seek advice.

New Model Adviser is a website powered by CoreData, showcasing our research and insights on financial advice: the profession, advisers, advice practices, licensees, legislation and more.

2 Comments

  1. adam@halesdouglass.com.au' Adam Passwell says:

    Hi Simon, not sure how you think it costs $1K for exam ???
    FARSEA’s real costs to Advisers, minimum time opportunity costs and real exam and course costs are:
    1) Exam, lets say 20 hrs study (very conservative from my discussions with other advisers) x $330 / hr charge rate = $6,600 + exam time 3 hrs $990 + exam costs $600.
    Thus a more realistic Adviser exam cost = $8 K each. And plenty of advisers i know spending more including trial exam costs, study course etc.
    A Far more realistic exam cost is at least $10K / Adviser.

    2) FARSEA Ethics course, compulsory for everyone to do this regardless of multiple past relevant degrees, experience, etc.
    120 hrs is FARSEA’s time allocation as a minimum required for the course x $330 / hr = $39,600 + $1600 course costs = $41,200.
    That’s for every adviser in the country, that has already spent good time and money on Govt uni degrees, Specialist Financial Advice courses, etc. Plus years of experience and years of CPD. But are now considered no longer qualified to do their job.

    3) For Advisers that aren’t previously relevant degree qualified, i agree they should be made to further educate. And they will likely do 6 FARSEA approved courses to get the Graduate Diploma (with 2 courses covered by prior learning). And that will cost them about $250,000 in course fees + time opportunity costs.

    Times this all by let’s say 15,000 adviser that do it all = over $1 Billion Adviser tax on time opportunity and real course costs.

    There is no doubt the previous RG146 education standards were a joke and real professional, well educated advisers have been saying this to the govt for 20 years. But the way FARSEA has treated well educated and well experienced advisers is disgusting and extremely expensive.
    FARSEA started out 3 years ago saying – Any degree older than 10 years counts for NOTHING and everyone starts again from scratch with full new degrees required. Sounds wonderful to have spent 3 years at a Govt uni to get a double major degree in Economics and Business Law and be told later by the same Govt that it’s worthless and a waste of my time and costs.
    How would like Simon to be forced to go back to Uni and restart your education to continue to be a Journo ???

    FARSEA is needed for new entrants and those not previously well educated.
    As for the existing advisers who are already well educated, the process and costs, its freaking out of control.
    Over $1 Billion Adviser Tax, that is a hell of a adviser tax Simon.
    Regards
    Adam Passwell
    Ph: 02 4455 5333

  2. mike@gmaiil.com' Michael says:

    The question that should have been asked “would you be prepared to pay 50% more for financial advice given the cost to deliver advice under all these new regulations will make seeking advice more expensive?”

    I expect everyone wants their advisers to be more professional, but how many are prepared to pay for it?

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