June 30th is just the beginning

RECENTLYMoney Managementreported on a survey conducted by Assessment Education Services concerning the implementation of Policy Statement 146 (PS 146) in small and medium dealer groups.

The survey identified that many licensees had failed to communicate competency requirements to their advisers. It also found that a significant number of advisers believed they had met the requirements when this was not the case.

In particular, the key problems for those who had not met the requirements included relying on qualifications that were not on the Australian Securities and Investments Commission’s (ASIC) register, not having applied for exemptions for courses that were on the register, and basing their claim to competence on outdated dealer group requirements for DFP 1, 2 and 5, which do not fully demonstrate competency for most advisers.

So how effective are existing continuing education programs if a regulatory requirement that has been widely circulating and communicated to dealer groups for over two years, is so poorly understood by so many advisers less than two months before it is enacted?

The consequences of not meeting the requirements of PS 146 may mean, at the very least, a reduction in the areas an adviser may assist their clients, and in many cases, the adviser having to cease advising activities.

However, getting over the line is not the end of the problem and while most activity has focused on demonstrating competency prior to June 30, increasing numbers of dealer groups now realise that PS 146 is not something they can stop worrying about after June 30.

The continuing education requirements outlined in PS 146 have attracted less attention from dealer groups, while they have been focusing on the more pressing priority of keeping their advisers in business after July 1.

However, there is now a growing appreciation that PS 146 is more than just making sure each adviser can demonstrate competency on June 30.

Those advisers operating from July 1 need to be working with a licensee who has: a training policy and processes in place to identify and rectify problems that arise from a lack of knowledge or skills; a training officer; and individual training plans for every adviser.

The policy statement requires each licensee to perform a number of duties, including the assessment of the adviser’s training needs in relation to the training standards; identifying the adviser’s gaps or weaknesses in the preceding year and the areas where training will be focused; setting objectives to be met; and deciding the structure of the continuing training program.

Of course, if you are reading this with the comfort of having a completed training plan on file, and the contact details of your training officer who has signed you off as competent, you can relax. If you haven’t, you may want to drop your compliance manager a line.

Hopefully your PS 146 implementation program will have included significant elements of assessment and feedback. A checklist approach to the implementation of PS 146 will leave dealer groups without meaningful information on which to base individual training plans.

If you haven’t completed any detailed training needs analysis during the process of certifying PS 146, developing and managing training plans is going to be more complicated, particularly if these programs are going to be meaningful and relevant for experienced advisers.

The substantive content of continuing education will also receive a lot more attention from July 1. We can expect ASIC to take particular interest in how licensees propose to detect and respond to individual gaps or weaknesses in their advisers’ knowledge and skills.

This will require a more complex assessment and response process than is usually associated with most professional development programs based on attendance at a seminar or everyone viewing the same monthly video workshop.

We can expect these programs to continue to be an important element of a training plan.

However, you can expect individual assessment to become a frequent, if not a compulsory element of training events to ensure effective feedback and tailored responses from organisations participating in the delivery of training to dealer groups.

Fund managers might also consider how their contributions to dealer group training, through business development efforts and contributions to professional development workshops, can be enhanced by working more closely with licensees.

Dealer groups will also need to adapt or implement management reporting processes to assist them manage continuing education programs and respond to problems that can be addressed with a training response.

They will also need to consider how they will integrate training responses from different providers to ensure accurate communication and reporting unless they are prepared to restrict themselves to one provider.

Finally don’t forget Tier 2.

While the lower level of advice provided by staff in Tier 2 roles may appear to reduce the complexity of the task, this is offset by the higher staff turnover and fewer relevant formal qualifications held by these individuals.

These factors, combined with the sheer number of staff in insurance companies, fund managers, banks and other institutions whose staff are affected, will mean that implementing Tier 2 compliance will pose an interesting exercise.

Tier 2 staff need to meet competency requirements by March 11, 2004.

James Ryan is the technicaldirector of Assessment Education Services Pty Ltd.