FASEA and the Adviser Professional Standards

The Adviser Professional Standards are intended to raise the education, training and ethical standards of financial advisers by requiring those who provide personal advice to retail clients to hold a degree, pass an exam, meet CPD requirements and comply with a Code of Ethics. New advisers who enter the profession from 1 January 2019 (or those who otherwise don’t meet the transitional rule requirements) will also need to undertake a 12-month supervision and training program, known as the Professional Year.

The Financial Adviser Standards and Ethics Authority (FASEA) is responsible for setting and maintaining the new standards. Legislative instruments for all standards were registered in 2018 and 2019.

This is an updated version of an article first published in February 2019. We intend to update this article regularly to take into account new developments, with the aim of it being used as a valuable reference tool.

Who is required to meet the new standards?

Financial advisers need to meet the standards if they give personal advice to retail clients on financial products, other than basic banking products, general insurance products, consumer credit insurance, or a combination of any of these products. This includes accountants who give personal advice under a limited Australian Financial Services Licence (AFSL).

For simplicity, we use the term ‘Adviser’ to refer to those who are subject to the standards.

Transitional arrangements – education and exam requirements

Transitional arrangements apply to Existing Advisers, that is, those who were authorised to provide personal advice to retail clients at any time from 1 January 2016 to 31 December 2018 (and who were not subject to a banning order or enforceable undertaking not to provide financial product advice or financial services generally on 1 January 2019).

The transitional arrangements give Existing Advisers until 1 January 2026 (previously 1 January 2024) to meet the education standards and 1 January 2022 (previously 1 January 2021) to pass the Exam. Existing Advisers are not required to undertake a Professional Year.

Advisers can demonstrate they are an Existing Adviser by having had a status of 'current' on ASIC’s Financial Advisers Register at any time from 1 January 2016 to 31 December 2018. Without this recognition, ASIC has stated that it will treat an Adviser as a New Entrant to the industry.¹

Milestones

The timeline below shows the key milestones for the reforms.

All Advisers (both new and existing) are subject to FASEA Continuing Professional Development (CPD) standards which commenced on 1 January 2019.² Licensees have certain obligations to support Advisers in meeting these requirements.

The requirements are based around a licensee’s CPD year.

CPD year

This is a 12-month period beginning on a date determined by the licensee.

The CPD year can start at any time during the calendar year. The licensee has an obligation to notify ASIC of the start date.

The CPD requirements commenced on 1 January 2019 but a licensee’s CPD year won’t necessarily have commenced on that date. FASEA provides transitional arrangements to deal with this.

Transitional arrangements - example

A licensee’s CPD year runs from 1 July to 30 June. The FASEA CPD requirements effectively bring forward the start date of the licensees first CPD year to 1 January 2019. This means the licensee’s first CPD year runs for an 18-month period, from 1 January 2019 to 30 June 2020. The FASEA standard also proportionately increases the CPD hours-based requirements to 150 per cent for this period.   

 In recognition of the disruptions caused by COVID-19, FASEA announced a 3-month relief period to give advisers additional time to complete their CPD requirements. The 3-month period can be added on to the end of the CPD year that includes 18 March 2020 (the date the Government declared a human biosecurity emergency in relation to COIVD-19). CPD activities undertaken during this period can be counted towards the CPD year that includes 18 March 2020, or the following CPD year (but not both CPD years).

Adviser obligations

In summary:

• an Adviser needs to complete at least 40 hours of CPD per CPD year for those working full-time or 36 hours for those working part-time, subject to the consent of the Adviser’s licensee
• at least 70 per cent of the CPD hours must be on activities approved by the Adviser’s licensee (ie 28 hours per CPD year for a full-time Adviser)
• a minimum number of hours per CPD year must be spent on CPD categories as shown in the following table

• a maximum of four hours of professional or technical reading can be counted towards meeting the requirements 
• a maximum of 30 hours of formal relevant education provided by an education provider can be counted towards meeting the requirements   

Formal relevant education

This may include:

• a FASEA Approved Degree or equivalent qualification
• education or training provided or approved by a professional association
• formal education or training towards qualifications or designations relevant to practice as an Adviser.

• record-keeping requirements apply
• special rules will apply to Advisers who take a career break
• Advisers are required to have a written CPD plan for each CPD year.

CPD plan

• An Adviser’s CPD plan must be in place before the start of the CPD year. However, for the first CPD year, the plan was required to be in place by 31 March 2019.
• The CPD plan must identify areas for improvement in, and development and extension of, the Adviser’s competence, knowledge and skills and describe the CPD activities the Adviser will complete during the CPD year to achieve those improvements.
• If the Adviser is employed by a licensee, the Adviser must give the employer a copy of the plan.

Licensee obligations

A licensee who is responsible for Advisers has obligations to:

• develop and adopt a CPD policy for its Advisers 

CPD policy

A licensee’s CPD policy must:

• specify the licensee’s CPD year
• set out the licensee’s overall approach to its CPD obligations and the CPD obligations of its Advisers
• describe how the licensee will:
  • assess and approve CPD plans of its Advisers
  • monitor implementation of CPD plans of its Advisers
  • assess and approve CPD activities and attribute hours to them
  • ensure that at least 70 per cent of the hours counted by its Advisers are for licensee approved activities
  • check Adviser’s compliance with the policy and the FASEA requirements
  • record and maintain evidence of completion of and outcomes of CPD activities
  • ensure records are completed and maintained; and
• be stored in a central location, such as a website, intranet or shared folder that is easily accessible by the licensee’s Advisers.⁴

For the first CPD year, the CPD policy was required to be in place by 31 March 2019.

• approve sufficient CPD activities to enable its Advisers to meet the requirement that 70 per cent of CPD hours is spent on licensee approved activities

Approval of CPD activities

FASEA has indicated that it will provide a principles guide to enable consistency within the industry in how licensees assess CPD. In assessing CPD, licensees are required to consider:

• level of expertise of the CPD provider
• expertise of facilitators and/or those delivering the CPD
• level of learning undertaken
• stated learning outcomes for the CPD activity
• volume of time in undertaking the CPD activity, and
• approach for verification of learning outcomes achieved.

• when approving a CPD activity, determine the number of hours that can be counted for completing the activity
• monitor its employed Advisers’ implementation of their CPD plans
• make appropriate resources available to enable Adviser compliance, monitor its Adviser’s implementation of CPD plans and check compliance with the CPD policy.

Implications of non-compliance

Licensees are required to notify ASIC of any Advisers that do not complete the required CPD by the end of the licensee’s CPD year. Non-compliance will be shown on the ASIC Financial Adviser Register (FAR).

It is important to note that CPD non-compliance will need to be reported and published regardless of the circumstances that lead to the non-compliance. No materiality test applies.

Advisers should ensure they are on track to meet their CPD requirements well in advance of the end of the CPD year to mitigate the risk of non-compliance due to any unforeseen circumstances.

Unlike New Entrants who are required to have completed a FASEA Approved Degree before they can be authorised, Existing Advisers have until 1 January 2026 (previously 1 January 2024) to complete the required courses.

FASEA’s Education Pathways set out the range of courses that both Existing Advisers and New Entrants will need to undertake to meet the new standard.

The specific requirements of each pathway depend on the amount and nature of education an Existing Adviser has already completed. FASEA has published detailed information on the various options available to Existing Advisers in a Policy Statement, which incorporates the recognition of prior learning and how this applies to each pathway.⁵

Two extremes

For Existing Advisers, the minimum additional education required will be a single FASEA Bridging Course (on Ethics and Professionalism) and the maximum will be a FASEA Approved Graduate Diploma of eight subjects (however, completion of a FASEA Approved Degree containing 24 subjects will also meet the requirements).

Advisers required to complete a single Bridging Course

The single Bridging Course requirement will apply to an Existing Adviser who already holds any of the following:

• a FASEA Approved bachelor’s degree, graduate diploma or master’s degree 

Approved Degree

Several degrees from a range of education providers have been approved by FASEA for New Entrants which are also applicable to Existing Advisers.⁶ These cover a range of bachelor’s and postgraduate degrees, generally with majors/specialisations in financial planning. Conditions for each degree are specified, for example, particular subjects must have been completed.

• a Relevant Degree in addition to an Advanced Diploma of Financial Services/Planning (or equivalent, including the historical eight course Diploma of Financial Planning – ‘DFP 1-8’ awarded by the Financial Planning Association).⁷

Relevant Degree

In its Policy Statement, FASEA indicates that this will be a bachelor’s degree, graduate diploma or master’s degree that contains at least eight courses in one or more of the following fields of study in any combination:

• Financial planning 
• Accounting
• Taxation/tax law (as approved by the Tax Practitioners Board)
• Finance law
• Finance
• Business law (as approved by the Tax Practitioners Board)
• Investment
• Estate law 
• Banking
• Economics

FASEA has opened Degree Assessment Service for a fee to give certainty to those where it is not obvious or clear that the degree meets the relevant knowledge areas. This service is available to advisers and license.

• a Relevant Degree in addition to study towards a Professional Designation for which FASEA has awarded 2 credits

Study towards an Approved Professional Designation

FASEA provides recognition for completed study towards the following Professional Designations:⁸

 

Professional Designation details		Credits awarded by FASEA
Financial Planning Association (FPA)	5 Unit CFP Program – commenced after 2003	2
	CFP 1-4 commenced after 1 July 1999 and before 31 December 2003	2
SMSF Association	SMSF Specialist Adviser program (9 topic areas)	1
Association of Financial Advisers (AFA)	Fellow Chartered Financial Practitioner (FChFP) (offered by Mentor Education) – commenced in or after 2009 and completed before 2013	1
	FChFP (offered by Kaplan Professional) – commenced in or after 2013	2
	Chartered Life Practitioner (ChLP) (offered by Kaplan Professional) commenced in or after 2013	2
	ChLP (offered by Mentor Education) – commenced between 2009 and 2013	1
Chartered Accountants Australia and New Zealand’s (CAANZ)	Chartered Accountant Program commenced in or after 1972	1
Certified Practicing Accountants’ (CPA) Australia	CPA Program commenced in or after 1989	1
	CPA Australia’s CPA program that includes at least one of the following Financial Planning electives: Personal Financial Planning and Superannuation Financial Planning Fundamentals Superannuation and Retirement Investment Strategies Risk Advice and Insurance Financial Risk Management.	2
Portfolio Construction Forum	Certified Investment Management Analyst (CIMA) Program, commenced in or after 2001	1
Chartered Financial Analyst (CFA) Institute	Chartered Financial Analyst (CFA) Program	1
Stockbrokers and Financial Advisers Association (SAFAA)	Professional Diploma in Stockbroking	1

Advisers required to complete full Graduate Diploma

The eight-subject Graduate Diploma will need to be completed by an Existing Adviser without any of the following:

• formal degree qualification
• Advanced Diploma of Financial Services/Planning, or
• FASEA Approved Professional Designation.

Advisers required to complete between one and eight courses

Many Advisers will fall somewhere in between these two extremes and will be required to complete between one and eight courses before 1 January 2026 (previously 1 January 2024).

Education Pathways Tool and Feedback Service

FASEA’s Education Pathways Tool can help Advisers and Licensees apply the education standard and work out future study requirements. In addition, FASEA has an Australian Qualification Feedback Service through which advisers can apply to FASEA (for a fee of either $120 or $250) to obtain feedback on their education pathway in situations where there is some uncertainty.

Foreign qualifications

FASEA has released a Policy Statement on how individuals who have obtained their qualifications outside Australia will be assessed to determine whether they meet the education standard.⁹

Advisers with foreign qualifications will need to apply to FASEA for approval of their qualification. Prior to applying to FASEA, the qualification will need to be assessed by a Department of Education and Training (DET) approved body. This assessment compares an overseas qualification to an Australian qualification, using the Australian Qualifications Framework.

For Existing Advisers with foreign qualifications, a DET approved degree will be assessed by FASEA as either relevant or non-relevant (similar to Existing Advisers with Australian qualifications). This, together with any additional qualifications or FASEA Approved Professional Designations the Adviser holds, will determine the amount of additional study required.

Implications if education not completed in time

An Existing Adviser who does not complete the required education before 1 January 2026 (previously 1 January 2024) will cease to be authorised as an Adviser from that date. In order to become authorised again, the requirements for New Entrants will need to be met, including the completion of a Professional Year.

Existing Advisers have until 1 January 2022 (previously 1 January 2021) to pass the Exam. The first three sittings of the exam were held in 2019. Further sittings are being held every two months from February 2020.  

FASEA has announced high level results for the first three sittings of the Exam which are as follows:

Knowledge and skills assessed

The Exam covers three areas of knowledge and skills:

• Financial advice regulatory and legal obligations
• Applied ethical and professional reasoning and communication, and
• Financial advice construction.

Format

The Exam consists of at least 70 questions, including a minimum of 64 selected response (multiple choice) and six written response (case study style) questions.

The duration is 3.5 hours, including 15 minutes of reading time, and is open book for selected statutory materials.

Candidates with special needs can request support for appropriate assistance to allow them to sit the Exam.

Registration

Advisers need to register in advance to sit the Exam. The cost of the Exam is $594. This cost applies each time it is attempted.

Exam locations and scheduling

The Exam is being delivered in Sydney, Canberra, Melbourne, Brisbane, Townsville, Adelaide, Darwin, Perth and Hobart as well as a number of regional centres.

A digital delivery option was made available in 2020 to accommodate candidates who live at least 150 kilometres from all Exam centres.¹⁰ Due to COVID-19, this delivery method was exclusively used for the April and June 2020 exams in place of face-to-face exams and will be optional regardless of location for candidates sitting the exam in the August, October and November sittings.¹¹

The timetable of Exam dates is published on FASEA’s website, along with registration procedures.

Special consideration is available where there are exceptional circumstances beyond the control of the candidate. This enables the Exam to be sat later at no additional fee.

Results

An Adviser will need to pass the Exam to a credit level. Results are released between 6 and 8 weeks after sitting the Exam.

A candidate who fails the Exam may, for a fee, apply for a one-time review of the marking of the written response questions.

Resits after failed attempts

There is no explicit limit on the number of times the Exam can be attempted. However, a candidate who fails the Exam is unable to register to sit the Exam again until three months after the failed attempt.

Preparation – learning and study materials

FASEA has published preparation materials, including an Exam Preparation Guide, Exam Candidate Video and Practice Questions.

Several education providers are also running Exam preparation training courses.

Implications if Exam not passed in time

An Existing Adviser who does not pass the Exam before 1 January 2022 (previously 1 January 2021) will cease to be authorised as an Adviser from that date. In order to become authorised again, the requirements for New Entrants will need to be met, including the completion of a Professional Year.

The legislative instrument for the Code of Ethics was registered on 11 February 2019.

The Code applies to all Advisers from 1 January 2020.

The values and standards comprising the Code of Ethics

Download the Values and Standards of the Code on a single printable page here.

The Code is underpinned by The Values.

The Values

You must always act in a way that demonstrates, realises and promotes the following values:

(a) trustworthiness

(b) competence

(c) honesty

(d) fairness

(e) diligence. 

These values are paramount. All the other provisions of this Code must be read and applied in a way that promotes the values.

The Standards

Ethical behaviour

Standard 1:

You must act in accordance with all applicable laws, including this Code, and not try to avoid or circumvent their intent.

Standard 2:

You must act with integrity and in the best interests of each of your clients.

Standard 3:

You must not advise, refer or act in any other manner where you have a conflict of interest or duty.

Client care

Standard 4:

You may act for a client only with the client’s free, prior and informed consent. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.

Standard 5:

All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances.

You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.

Standard 6:

You must take into account the broad effects arising from the client acting on your advice and actively consider the client’s broader, long-term interests and likely circumstances.

Quality process 

Standard 7:

The client must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client, including any fees for services that may be charged. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.

Except where expressly permitted by the Corporations Act 2001, you may not receive any benefits, in connection with acting for a client, that derive from a third party other than your principal.

You must satisfy yourself that any fees and charges that the client must pay to you or your principal, and any benefits that you or your principal receive, in connection with acting for the client are fair and reasonable and represent value for money for the client.

Standard 8:

You must ensure that your records of clients, including former clients, are kept in a form that is complete and accurate.

Standard 9:

All advice you give, and all products you recommend, to a client must be offered in good faith and with competence and be neither misleading nor deceptive.

Professional commitment

Standard 10:

You must develop, maintain and apply a high level of relevant knowledge and skills.

Standard 11:

You must cooperate with ASIC and monitoring bodies in any investigation of a breach or potential breach of this Code.

Standard 12:

Individually and in cooperation with peers, you must uphold and promote the ethical standards of the profession and hold each other accountable for the protection of the public interest.

Guidance

The explanatory statement to the legislative instrument includes some examples and guidance on a number of the standards.

FASEA released further guidance on 18 October 2019, which provides 32 examples to illustrate how the Code should be applied.

Following extensive industry feedback, FASEA released a preliminary response to submissions in December 2019 and indicated that it will continue to consult and engage with stakeholders in the lead up to the implementation of the new disciplinary system (see below).

Meanwhile, there is some uncertainty around the meaning and application of some standards of the Code that is yet to be addressed.

Enforcement of the Code of Ethics

Originally, compliance with the Code of Ethics was to be enforced by one or more industry governed Code Monitoring Bodies approved by ASIC.

However, in October 2019, the Government announced that it would fast-track the Hayne Royal Commission’s recommendation to establish a new disciplinary system and a single disciplinary body for financial advisers. This will replace the role of Code Monitoring Bodies and, following the Government’s announcement, applications to ASIC for Code Monitoring Body approval were withdrawn. As a result, ASIC has made a legislative instrument to provide relief to licensees from the Corporations Act Code Monitoring Body requirements.

Until the new disciplinary system is operational, licensees have primary responsibility for monitoring Advisers compliance with the Code.

ASIC has outlined reasonable steps it expects of licensees to ensure Advisers comply with the Code and stated that it will take a facilitative approach to compliance with standards 3 and 7 (which ASIC has identified as more challenging for industry) during this period. 

Reasonable steps expected of licensees

The reasonable steps that ASIC expects AFS licensees to take to ensure that their financial advisers comply with the code include the following systems and processes:

• making sure that their advisers are aware that they need to comply with the code from 1 January 2020 onwards
• providing training and/or guidance to their advisers on the types of conduct that is consistent/inconsistent with the code
• facilitating individual advisers’ ability to raise concerns with the AFS licensee about how the licensee’s systems and controls may be hindering their ability to comply with the code, and acting on those concerns where appropriate
• considering whether advisers are complying with the code as part of their regular, ongoing monitoring of adviser conduct; and
• when it is in place, considering the decisions of the new disciplinary body and making any necessary changes to their systems and processes

ASIC has stated that it will take into account the context in which licensees are operating, including:

• the current dynamic regulatory environment
  
• the timing of guidance provided by FASEA about the meaning of the code, and
• the evolving industry understanding about the meaning and implications of the code.

AFCA has announced that it will take a measured and considered approach in interpreting the Code relation to complaints received.