Some licensees providing income safety net for exiting advisers
Some licensees have developed a safety net for advisers who have failed the advisers exam meaning that income will be collected on their behalf until such time as they sell their client books.
Financial planning business broker, John Birt has referenced the arrangements in an assessment of the state of the financial planning business market in the wake of the 48% fail rate associated with the last financial advisers exam.
Birt, the principal of Radar Results, said the reality was that in less than two weeks licensees would be required to remove many financial advisers from the Financial Advisers Register (FAR) and in doing so he noted that of the 400 to 500 to come of the register, not all would be practicing advisers.
“Many may be employees such as paraplanners who have held an Authorised Representative (AR) status without really needing one,” he said. “How many are employed financial planners who could be made redundant because they cannot provide advice?”
“An option is to bring their qualifications up to an approved degree or equivalent level to meet the education requirements. They must have an approved bachelor’s degree (AQF7 level) or above or equivalent. They also have to pass the Financial Advisers Exam and complete the professional year, which is one-year full-time – equivalent to 1,600 hours. At least 100 of these hours must be structured training. That could be a long time not being an active adviser.”
“If some of the 400-500 advisers are self-employed, what happens with the financial planning client base? If the adviser is a pure risk insurance writer, what happens to their insurance clients?”
“Licensees must cease paying revenue to the advisers on 1 October 2022 and notify the financial planning clients. I understand that some Licensees have developed a safety net whereby the income will be collected on behalf of the former advisers for a while, giving the affected advisers time to sell their clients. If the adviser has their own Australia Financial Services License (AFSL), they must effectively sell the AFSL, the company and the client base,” Birt said.
“Unfortunately, ASIC does not allow an AFSL to be transferred to another person or company, with the existing company always retaining the AFSL as an asset. Besides selling, the adviser can close down the AFSL, which takes time and can be costly.”
“I have been mystified about why FASEA started and its purpose. If it’s about ethics, Corporations Act beefed up the penalty for unethical behaviour after the Future of Financial Advice (FOFA) legislation was passed in 2013. The Best Interest Duty was part of this legislation. The Levy Review proposes to overturn legislation, effectively making key planks of the Hayne reforms and Labor’s landmark Future of Financial Advice (FOFA) laws redundant.”
“It always troubled me why the Government had to introduce laws telling advisers to act in the Best Interests of their clients. Were advisers not acting in the best interests of their clients before FOFA, and if not, why were they not? If financial advisers are not acting in the best interest of their clients, passing an exam will not change their behaviour. FOFA failed, The Royal Commission failed, and FASEA failed; what’s the next failure?”
Just ask MP Stewart Robert, it’s all Advisers fault.
Of course it is.
It’s never LNP, ASIC, FARSEA or any Government bureaucrats fault.
The AFSL was always doomed. But an AR is never prevented from becoming a paraplanner employee of another AR. Levy hinted as such when she spoke about Settlement agents vs Lawyers.
I get that Birt is trying to get his name in the news as some free promo for his practice broking business but here we are at the end of the 9 month extension of the earlier 12 month extension of the original two & a half year period to pass an exam to stay in the game….
How do people who allegedly offer planning services for a living, fail to plan for an extinction level event for their own businesses??? and then complain that these deadlines have crept up on them????
Whatever the merits or not of the whole exam & education upgrade introduced by the former government, how is it that anyone who wanted to stay in business failed to do whatever was necessary to pass the exam well before now?? It’s been over 3 yrs since the first exam sitting was held.
Am I the only one wondering who will be providing said service to clients for these fees, whilst the licensee continues to collect them?
The answer is no one but that isn’t important because people who have had 3 years to pass an exam failed to do so.