There has been some consternation in the advice community around the newly authorised advisers listed on ASIC's Financial Adviser Register (FAR) this year, given that new advisers must meet the new regulatory standards required from January 1 and the fact that the FASEA exam has only recently been set. Analysis of some new authorisations has also revealed some interesting results regarding qualifications.
To get clarity around this process and explain how there are nearly 20 new advisers listed, we need to understand exactly what new advisers must do prior to becoming a “qualified” authorised representative. New advisers who enter the profession from 1 January 2019 must:
- complete a FASEA Approved degree
- complete a Professional Year
- successfully pass the FASEA Exam
- Sign up to a Code of Ethics (The Code will apply to all Advisers - both new and existing, from 1 January 2020).
- Engage in ongoing PD
Some advisers have circumvented some or all these requirements through exemptions. At least one adviser who has been authorised this year was practicing overseas and was granted a “Foreign Adviser Exemption”. There are also small a number of foreign exchange traders newly listed. Other exemptions must also apply as 3 advisers have been listed as providing advice prior to 2019, although they have no listing on the FAR prior to this year. Our data analysis indicates that only one if the newly registered advisers this year actually meets FASEA’s educational standards in having a bachelor degree from the FASEA approved degree list.
Considering completion of an approved degree is one of the first requirements of the FASEA regime, this raises questions regarding ability of the public to use the FAR to validate authorised reps. Of course, there may have been an administrative error and the new advisers correct details are yet to be updated.
It has also been stated that advisers undertaking their professional year are eligible to be listed on ASIC Financial Adviser Register (FAR). During a New Entrant’s Professional Year and after they have completed a FASEA Approved degree and passed the Exam, they may be referred to as a Provisional Financial Adviser or a Provisional Financial Planner and listed on the FAR.
It is only after they have finished their professional year that a new entrant will be authorised to give financial advice to clients.
Unfortunately, there is nothing listed on the FAR regarding advisers being “Provisional” in status and given a number of new listings this year, prior to the exam being formalised, it would appear ASIC has given some leeway to the licensee’s and advisers involved. It is assumed ASIC has a mechanism to track when a provisional adviser’s professional year actually starts and when it will finish.
With the continued uncertainty around the processes involved in the listing and authorisation new advisers it is unclear how any member of the public could be sure that an adviser listed on the FAR is actually authorised to provide advice.
For consumers, the raison d’etre of the FAR is to provide clarity about the authenticity of an individual offering them financial advice. They’ve long been told if the person they're seeking advice from is not on the register, do not take the advice. Now it seems that potentially there are some people listed on the register who aren’t qualified to give advice as well.
There are two concerning parts to the ostensibly erroneous listings in the FAR, neither of them would an observer with confidence. The first is that some licensees still don’t know or realise what is required for new authorisations to be listed. The second is the possibility that ASIC are just uploading the information for public consumption and not checking its veracity. We’re not sure which would be of most concern! There is a need for clarity around this so that the FAR and it's listings maintain their integrity.
We’ll keep unpicking the processes in place around FASEA’s regulatory reform in an attempt to keep advisers up to date and informed regarding the latest developments as there is still a fair degree of confusion and uncertainly from many advisers and licensees that we’ve spoken to.
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Comments4
"I suggest you should have simply asked ASIC to confirm the handful of 'new' advisers registered during 2019 are all qualified before publishing this piece. You make several speculations about "ostensibly erroneous listings" without appearing to have obtained any evidence that any of the new registrations are in fact erroneous. I suggest that a number (many? most?) of these 'new' advisers were actually 'registered' advisers prior to the implementation of the FAR, so are actually 'existing' advisers. For example, if you look at the ASIC Financial Advisers Dataset, one adviser that was 'registered' on 26 Feb 2019 is actually listed as having first provided advice in 1970. Others registered in 2019 first gave advice in 1987 and 1989. So many of these 'new' advisers may be professionals that moved from active client advice into management roles, and where not giving advice in recent years, so were not on the FAR. But now the new rules require such people to pass the FASEA exam and get 'registered'. So I expect most of these new ENTRIES are not new ADVISERS - so don't have to meet the professional year or pass the FASEA exam prior to getting added to the register. It would be nice if a company that is purporting to be a reliable source of data about financial advisers actually made sure it had accurate facts to base its opinions on. Articles like this makes me have second thought about having invested in Adviser Ratings in the current crowd funding round."
R 00:08 on 11 Jul 19
"Good points Rhiannon. I know of at least one of those new advisers is provisional and i would expect more are. Why does ASIC let them register in the first place when they have haven't been licensed previously? Where are the checks? Is it the licensees fault only?"
Confusion much? 18:45 on 10 Jul 19
"The ASIC guidance actually prevents AFSLs from putting provisional advisers on the Financial Adviser Register. They are required to ensure that new entrants meet the qualification and exam standards but they are NOT allowed to add them to the Financial Adviser Register. "Between 1 January 2019 and 14 November 2019, licensees do not need to tell ASIC they have appointed a provisional relevant provider. Licensees should not lodge a form notifying ASIC that they have appointed a provisional relevant provider until 15 November 2019. If a licensee incorrectly lodges a form with ASIC to appoint a financial adviser when the person is actually a provisional relevant provider between 1 January 2019 and 14 November 2019, the licensee will need to pay extra fees to correct the error." SOURCE: https://asic.gov.au/regulatory-resources/financial-services/professional-standards-for-financial-advisers-reforms/ "
Rhiannon Robinson 16:58 on 10 Jul 19
"The whole FASEA system is a debacle, they are continually updating their requirements, course providers are doing the same and new and old advisers have no idea what is required. Licensee are walking blind too. I'd suggest the reason there are no new advisers is because no one wants to be in breach of regulations that aren't even set yet. Serious Catch-22."
Davis Cormack 15:26 on 10 Jul 19