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.
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.
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.
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.
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