Is the ‘experience pathway’ simply grandfathering?
Grandfathering has always represented an expedient device for dealing with the introduction of difficult and controversial legislative and regulatory change but it has had a chequered record of success in the financial planning industry.
Even when groups such as the Financial Planning Association (FPA) sought to use grandfathering with respect to the introduction of the Certified Financial Planner (CFP) designation it encountered prolonged criticism which only dissipated as those who had been grandfathered retired from the industry.
And so it goes with the Government’s latest attempts at grandfathering – allowing individuals who have 10 or more years of full-time experience as a financial adviser in the last 12 years to complete a tertiary level unit on the Code of Ethics in order to continue practicing.
The Government is not calling it grandfathering but, with a minor caveat (the getting of a tertiary level unit) that is what it amounts to.
Financial advisers and other stakeholders have until the end of this month to respond to the Treasury policy paper which proposes the changes and there have been no shortage of submissions lodged on the Government web site opposing the proposal announced by the Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, in early December.
Financial Newswire has been provided with copies of a number of the submissions filed with Treasury and a strong common theme has emerged – that many advisers believe that what are probably good intentions on the part of the Government will serve to undermine the overall push towards lifting educational standards and further professionalising the industry.
Indeed, the criticisms of the Government’s approach are very reminiscent of the criticisms directed at the FPA when it effectively allowed grandfathering with respect to use of the CFP designation – those who had to study hard and meet a new exacting standard were upset that other, usually older individuals were waved through.
Thus, if and when the Treasury ever publishes all the submissions it receives on the policy paper, a significant number will certainly be critical of how it has gone about achieving the objective of retaining more advisers in the industry by providing recognition of their experience.
But what should be recognised by financial advisers who are sceptical at the grandfathering approach is that statements by both the Government and the Federal Opposition suggest that when it comes to debate in the Parliament or reviews by Parliamentary Committee it will likely have bipartisan support.
It should not be forgotten that it was the Federal Opposition which first raised the prospect of an “experience pathway” while Hume co-opted the idea as part of a necessary step change from the Financial Adviser Standards and Ethics Authority (FASEA) regime.
Young and well qualified financial advisers are entitled to be critical of the policy proposal but the latest data around adviser numbers should tell them that experienced advisers are still exiting the industry at a rapid rate and they are simply not being replaced by new entrants.
They should also understand that successive Governments, not advisers, have been responsible for the policies which have brought the financial planning industry to where it is today
Grandfathering is an expedient device and there is usually little morality in political expediency.