The education evolution

If you suggest that growth in financial services education has come to a screeching halt, you will be met with passionate protest by those in the thick of it. Edge towards the issue of compliance — namely the industry’s RG 146 compliance standard — and you’re likely to be met with a collective yawn.

“Every now and then we have this sort of dialogue about education as specifically linked to the issue of regulation, and I have to say that that is really, really boring,” said Deen Sanders, deputy chief executive and head of professionalism at the Financial Planning Association (FPA).

He believes far too many people — and educators — are obsessed with the regulatory linkage between education and the needs of their clients, an insistence from the marketplace the association finds disappointing.

“Education is an important regulatory hurdle over which financial planners need jump in order to participate in the industry, but it is not where education ends. In fact, we’re much, much more interested in what happens after that.”

Later, he emphasised his point: “RG 146 is well and truly irrelevant to us.”

Sanders isn’t exactly sweeping the issue under the rug, nor dismissing the significance of entry-level requirements. He’s simply arguing — albeit fairly adamantly — that the compliance issue, so magnified in light of recent events, has gotten stale.

And he may well have a point. The global financial crisis has shifted the financial services landscape considerably, impacting every sector to varying degrees, education included.

Universally, education providers have acknowledged drops in enrolment figures, primarily for entry-level candidates, with the industry’s standard Diploma of Financial Services (Financial Planning) spearheading what has essentially become a static market.

Arguably, and despite its shortcomings, entry-level training has reached maturation point.

But beyond that, far from being a desolate landscape deprived of opportunity, enthusiasm abounds for the ongoing education evolution.

“We’re not seeing growth in enrolments in the initial compliance at the moment, but we’re seeing substantial growth in what we would call ‘corporate interventions’, where an organisation says, we’ve got 1,200 planners, come and help us address these issues of training and development that we have,” noted Marilyn Hill, general manager, financial services education, at Kaplan Professional. “Or they might say, we’ve got a cohort of X number of experienced advisers, we want them to do your graduate diploma with a financial planning major.”

It seems to be in the continuing professional development (CPD) and advanced/higher education program spaces that things are really shaping up.

Dealer groups are progressively turning to education providers for customised courses to self-accredit their employees, and ongoing professional development is expanding as professionals seek to differentiate themselves in an increasingly tight labour market.

According to Sanders, FPA members simply want more when it comes to education, a point the RG 146 debate is completely missing.

“Licensees are constantly asking us about new opportunities to sort of stimulate professional development. They’re looking at their business models, they’re thinking about the way professional advice is provided, and they’re asking us to come up with programs around that,” he said.

Hill also noted the growth in customised demands, and increased attention to quality of advice, with organisations wishing to ensure they have robust educational foundations in place.

“Clients do talk to us about the fact that they want to raise the bar on the quality of advice that’s being provided and, in order to do that, they want to make sure that people are across all the sorts of scenarios that potential clients could find themselves in.”

She said Kaplan has seen a growing level of interest from dealer groups and large banking institutions for internal certification of their advisers on, for example, margin lending or hedge funds.

“They’re just really trying to internally ensure that the standards … of the advice they offer are optimised by training and development, I think.”

As associate lecturer Gabrielle Parle, of the Faculty of Business at the regional University of the Sunshine Coast, explained, if anybody is thinking about boosting their education qualifications, now is probably the time to be doing it.

Parle, like other educators, is optimistic about the future of training in the industry, noting that planners can make a very strong case for the qualifications they are receiving as a result of, for example, a formal university education.

“The education is functioning not just as a means of giving these people information and training but embedded in these formal educational qualifications are ethical training, ability to think analytically and objectively and all those sorts of things,” she added.

“The industry can do itself an enormous favour by emphasising the fact it’s moving away from purely industry experience-based qualifications into objective qualifications from institutions such as universities.”

Damage control

Nevertheless, the industry faces some meaty problems. Coming off such calamities as Storm Financial and Westpoint, damage to the reputation of financial planners has inevitably involved questions about their ethical standards and professional qualifications — and as a result, education, where it all begins, has fallen under cross-examination.

“We need better policing of standards in the training industry generally,” said John Prowse, managing director of Pinnacle Financial Services Academy, who defends the quality of some of the programs available in the market.

“It’s not so much the standard as such, it’s the variability within the industry. The materials seem to range over from very skimpy material that’s quick to complete, to quite detailed, thorough material,” Prowse said.

“In terms of whether we should have a higher standard of education in regulation, I think that’s just simply an obvious point,” Sanders said.

“We’ve made it loudly before, we’re happy to continue to make it, that the regulatory hurdle for entry into the industry is far too low. And that’s the regulatory hurdle for entry into the industry. The profession has a higher hurdle. And that’s the important differentiation.”

He agreed that it is far too easy for participants in financial services to become authorised to provide advice.

“We’re not happy about that. We’ve constantly encouraged ASIC to increase that hurdle, we’ve discussed that with government, and we’ll frankly make that same comment again in our [Parliamentary Joint Committee] submission this time around.”

Notably, the FPA recently revisited its CPD policy to encourage a much wider engagement with education, an idea that was born years ago.

“We have higher expectations of membership than are the regulatory minimum,” Sanders noted.

The FPA wanted to reposition the policy not only around compliance issues, but to instead talk again about what it means to be an educated person in a “completely rounded manner”.

Transitional phase

Financial services seems well and truly to be an industry in transition, and damage control. Fighting off stinging criticism on a near daily basis, participants have also had to grapple with the consequences of the mighty financial crisis. Cue the evolution in education, clearly a key step along the way to recovery.

For Prowse, an external assessment for all financial planner candidates is a potential solution to many of the problems plaguing the industry. While he concedes it may seem a little “radical” just now, he believes such a move will achieve more than simply making regulation a lesser priority.

“There definitely is a bit of a conflict of interest for training providers when the person delivering the training is also [the person] assessing the effectiveness of the training. That’s the problem. The external exam would fix that,” he said.

He further noted the colour-by-number state of regulation: “At the moment, you do get that feeling, when the regulators come around and look at you as [a registered training organisation] … that they’re more concerned that they can tick all the boxes than that they’re really looking at the quality of your materials.”

The idea of a standard, industry-wide assessment certainly seems to have some merit, even though the current framework of the Corporations Law does not currently accommodate it due to its competency-based system. Examinations are not part of the national training package framework.

Hill is reluctant to comment on the possibility, arguing that it is probably a question for the professional bodies rather than the education providers.

“I do have enormous sympathy for the idea,” Sanders said, noting similar developments in the UK and US.

“In order to shift from that, the Australian Securities and Investments Commission would need to take a very, very significant step away from the current regulated training environment and institute an entirely new model of education regulation.

“It’s certainly the sort of thing we aspire to in the CFP.”

Incidentally, the FPA already offers a standard exam for CFP candidates with participating universities.

At the moment, 14 universities are linked to the FPA’s certification program, delivering components of the CFP in courses from undergraduate to masters-level programs

But Sanders added there are more fundamental errors with the model of entry education, so it needs rethinking entirely.

Model standards

All the same, a standard industry assessment will give clients more confidence that a planner’s expertise can be relied upon.

A suitable example is the highly regarded, global Chartered Financial Analysts (CFA) designation, administered by the CFA Institute, a network of 96,000 investment professionals, spanning 133 countries.

The association is, according to Olivia Engel, president of the CFA Society of Sydney, the global standard for investment knowledge, standards and ethics.

Prowse has only praise for the designation, for which providers such as Kaplan run courses to prepare applicants.

“If you run into somebody with a CFA qualification, you don’t need to make any enquiries as to where they did their training because you know they’ve met the requirements of the assessment,” Prowse said.

And therein lies the key point: arm yourself with a CFA designation and your competency is unlikely to be called into question. Each year more than 1,400 applicants attempt the punishing assessment process, which includes three six-hour exams (the pass rate is about 30 to 40 per cent).

“Every person that sits it is committed to the highest ethical standards and they agree to abide by the CFA Institute code of ethics and standards of professional conduct, which is a key differentiating factor for this kind of an educational designation,” Engle explained.

Similarly, the CFA has universities signing up to partner with it: by including 70 per cent of the CFA curriculum in their masters courses, it becomes a university partner.

It is an interesting development given that the CFA Institute talks about ethics and principles, rather than compliance and regulations.

“Instead of teaching people how to tick all the boxes, it teaches you what ethical behaviour is all about from the grass roots and the principles behind it,” Engel said.

The future

While Prowse feels ongoing education is still in a bit of a state of flux, he’s not unenthusiastic about the future.

“The FPA’s new CPD policy and the general improvement in the standard of professionalism in the advisory force will inevitably see some changes in CPD over the next few years, I think.”

Hill believes dealer groups are becoming more inventive in their approach to the education of their adviser bases. For example, some are adopting the use of education diagnostics and interventions, while others are looking at postgraduate qualifications and solutions for gaps in advisers’ training.

“I don’t think Kaplan’s experience would in any way confirm that there wasn’t a lot of thoughtful energy going into what makes an adviser well qualified to serve the consumer,” Hill said.

Issues aside, the education sector in financial services is one fuelled by diversity and, over time, greater purpose, particularly given the decline in the job market.

“When jobs are scarce, people look for ways to differentiate themselves, and education is one of those key things. So I think definitely there’s a higher demand for education in a period where finding a job is a lot tougher,” Engel said.

And on the issue of compliance, there are signs organisations are taking an almost self-regulatory approach.

“I was quite surprised by some commentary I read earlier in the year where people said, ‘oh look, we think that financial services education’s come to a dead end’, because that wouldn’t be the experience that we’re seeing with our clients,” Hill noted.

Experience with clients over the past six to nine months showed an expectation inside many organisations that their advisers will be at a level above, or well above, the minimum compliance of the diploma training package.

As Sanders pointed out, many licensees have acknowledged that the dominant compliance approach of the past few years has meant other forms of education have not been encouraged.

“They’ve been very focused — rightly, I think — on the compliance issue. But now they want to go beyond that, they want to expand beyond that into the much richer vein of professional education that is about building good, professional, rounded planners.”