ASIC's RG 146 training requirements - tidying up the loose ends

ASIC has established new competency standards around RG 146, but Cecilia Storniolo writes that there are many loose ends that need to be resolved before the ground rules are finally put in place. 

To date, the Australian Securities and Investments Commission (ASIC) has been responsible for setting minimum competency (training) standards for the financial services industry by way of Regulatory Guide 146: ‘Licensing: Training of financial product adviser’ (RG146). This guide is in addition to competency requirements set by an adviser’s dealer group (licensee) and professional association, where relevant. 

ASIC’s education requirements depend on the services provided by the adviser – such as  whether the adviser provides personal or general advice and whether the financial products being advised are Tier 1 (all financial products except Tier 2) or Tier 2 (basic banking products and non-cash payment products). 

Tier 1 education levels are set at a “Diploma” level and Tier 2 education levels are equivalent to a “Certificate III” level as recognised by the Australian Qualifications Framework.  

At a minimum, advisers need to complete a RG146 qualifying training course provided by a training organisation listed on ASIC’s Training Register and undertake annual continuous education requirements to meet licensing requirements. 

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In April 2011, ASIC released Consultation Paper 153 ‘Licensing: Training and assessment framework for financial advisers’ (CP153) which contained proposals to: 

• Enhance competency requirements relevant to Tier 1 financial advice; 
• Introduce  a national exam for all new and existing advisers who provide Tier 1 financial advice; 
• Hold knowledge update exams on a regular basis for new and existing advisers; 
• Introduce a supervisory model for new advice entrants; and 
• Enhance the continuous professional development requirements. 

While the competency requirements have not yet changed for existing or new advisers, the industry is on notice that they will.  

So what changes can we expect?   

Adviser competency, which is currently embedded in RG146 and overseen by ASIC, looks set to become a three-tier framework – each tier potentially independent from the other, but each required in order to be able to provide financial adviser services. 

RG146 to remain 

It is expected that ASIC will continue to require existing and new advisers to comply with RG146. ASIC’s website states that sections D and E of RG146 are under review and a further consultation paper was due to be released in December 2012, but remains unissued to date.  

RG146 will still apply to general and personal advice providers for Tier 1 and Tier 2 financial products.  

A national exam? 

On 11 April 2013, ASIC issued notice that the National Exam proposal – which has not been consulted on publicly since CP153 – has been delayed to enable Future of Financial Advice (FOFA) reforms to be embedded.

This news is welcome given the industry will need to address the competency requirements required by an updated RG146 and the Tax Practitioners Board (TPB) as a consequence of the Tax Agents Services Act (TASA).  

At this stage, CP153 provides the only insight into who will be required to sit the exam (existing and new advisers) and for which type of advice service – Tier 1 financial advice. 

The question of TASA 

With TASA’s application to financial advisers looming for implementation come 1 July 2013, the TPB has issued draft competency requirements regarding education and experience for those advisers who provide tax advice in the context of financial planning. This is included in Exposure Draft: Proposed TPB Guidelines TPB (PG) /2013 on March 2013.  

Broadly, the Tax Board proposes that advisers who provide tax advice in the context of financial planning – for general or personal financial product advice – will be required to: 

• Hold a degree or award approved by the TPB; or  
• Complete a TPB-approved Australian tax law course; and  
• Have engaged in between 12-24 months ‘relevant’ experience in the preceding five years. 

The TPB will also compel the registered agent to comply with its approved continuing education development program. 

Whilst the industry has a transition window of three years to meet education and experience requirements, existing advisers will need every bit of that transition window to ensure they obtain the relevant education and experience requirements. 

Advisers will be required to have their competency recognised and confirmed by the TPB before 1 July 2016 to enable them to continue to provide advice services from 1 July 2016. 

When 3 tiers are not better than 1 

With competency requirements only set to increase over the coming years, logic would suggest that we look to other professions for examples of how to better develop a competency framework. 

A three-tier competency process will be cumbersome and costly not only for financial advisers but also for licensees, ASIC and the Tax Board to administer and monitor. This will put further pressure on the cost of advice and the attractiveness of the industry to new entrants.  

Would not the industry and the advice profession benefit from a single competency framework, carefully considered and which afforded participants reasonable time to meet? 

With 68 days to go to 1 July 2013, there are still too many significant unknowns regarding financial adviser competency requirements.  

This is too important to be left until the last minute to be resolved. 

Cecilia Storniolo is senior policy manager at the Financial Services Council.