The number of legislative and regulatory changes for the financial planning industry coming through in the next couple of years could be too burdensome and distracting for advisers if the transition period is not applied properly, according to Association of Financial Advisers (AFA) chief Richard Klipin.
His comments followed the release of the Australian Securities and Investments Commission’s (ASIC’s) consultation paper on the new assessment and professional development framework for financial advisers, as well as the Treasury’s arrangements regarding financial planners providing tax advice.
The new consultation paper on licensing arrangements released by ASIC, CP153, proposes all new and existing planners be subject to a national exam to ensure they possess the necessary competencies.
The proposed framework also includes a mandatory professional year for all new advisers, as well as a knowledge update review requirement that would be completed every three years.
According to the Treasury’s announcement released last week, planners will also need to gain an additional form of registration to provide tax advice within the context of providing financial advice.
“To attain these competencies financial planners would be required to have certain tax-related qualifications to ensure that quality advice is provided and consumers can rely on that advice,” Treasury stated in its announcement of the new regulatory framework.
Klipin agreed that planners should continually develop their skills: “Having competency tests, the professional year under supervision, knowledge updates and continuing professional development will certainly drive the profession to greater heights and greater standards and the AFA certainly supports that.”
But Klipin added that these requirements, combined with changes flowing from other Future of Financial Advice proposals including the opt-in arrangement, had the potential to overburden small businesses.
“The greater concern we have across all of these changes is the quantity of change coming through and the pressure it will put on small businesses to adjust and to change,” he said.
According to Klipin, the cost, time and effort involved in adjusting to change of such proportions would certainly add distraction.
“We need to ensure collectively that implementation is effective so that it doesn’t disrupt what the focus of the profession is which is serving their clients and providing outcomes,” he added.
The Financial Planning Association (FPA) chief, Mark Rantall, said there was a big risk of change overlay.
“I think that any changes need to be well thought through to make sure they’re necessary and that they’re able to be logically put in place by financial planners with minimised disruption to their business and the service they provide to clients,” Rantall said.
Mercer financial planning partner Jo-Anne Bloch said the moves were a mixed blessing, with the higher educational requirements being welcome but the extra burden being placed on financial planners being problematic.
“It is a lot of change, but we do support lifting educational standards,” she said.
ASIC is considering a three-year transition period to be introduced for all existing advisers and a shorter phase-in period for new advisers “to minimise disruption to industry”.
The regulator stated that industry participants could provide feedback and comments on the proposed requirements relating to professional development and assessment until 1 July, 2011.
