In the past, Financial Advisers may have viewed continuing professional development (CPD) as an administrative obligation that needed to be ticked off at the end of each year. However, developments over the past few years challenge that notion, placing greater responsibility on individual advisers to reflect on their own individual development, creating a shift away from CPD being seen as a tick-a-box exercise, towards seeing it as an opportunity to improve knowledge and professionalism.
The Financial Adviser CPD Standard
The CPD Standard commenced on 1 January 2019 and is one of five Adviser Professional Standards introduced under legislation passed by Parliament in 2017. Together, the Professional Standards are aimed at lifting the education, training and ethical standards of Financial Advisers.
As with all the Professional Standards, the Financial Adviser Standards and Ethics Authority (FASEA) was tasked with setting the detailed requirements of the CPD Standard.
At a high level, the CPD Standard places a greater onus on individual advisers to improve, develop and extend their competence, knowledge and skills. It also places more responsibility on licensees to ensure adviser compliance.
Some of the specific requirements of the CPD Standard are:
- Advisers must complete a minimum of 40 hours of "qualifying" CPD each CPD year, including:
- A minimum of 5 hours each in the areas of Technical competence, Client care and practice and Regulatory compliance and consumer protection
- A minimum of 9 hours in the area of Professionalism and ethics.
The balance of the 40 hours can be made up of any of the above areas or other “qualifying” CPD. In order for an activity to be “qualifying” CPD, the activity must:
- primarily deal with matters related to the provision of financial product advice, financial advice services and financial advice business
- be led or conducted by one or more persons who are appropriate, and have sufficient standing, expertise, academic qualifications and/or practical experience
- be designed to enhance relevant providers’ knowledge and skills in areas that are relevant to the provision of financial product advice and financial advice services.
- There are caps on the number of hours that can be counted towards formal education (maximum of 30 hours per year) and professional or technical reading (4 hours per year).
- Each adviser must have a CPD Plan in place prior to the state of each CPD year that identifies areas for improvement in, and development and extension of, the provider’s competence, knowledge and skills and describe the qualifying CPD activities the provider will complete during the CPD year to achieve those improvements.
- Licensees have an explicit legislative obligation to ensure advisers are complying with the CPD Standard. Licensees must also have a CPD Policy that, amongst other things, describe how the licensee will assess and approve CPD activities, check advisers’ compliance and meet record keeping requirements. At least 70 per cent of the CPD undertaken by an adviser must be approved by the licensee. FASEA’s guidance states that, in approving CPD, licensees are required to consider:
- The level of expertise of the CPD provider
- Expertise of the facilitators and/or those delivering the CPD
- The level of learning undertaken
- The stated learning outcomes for the activity
- Volume of time in undertaking the activity
- Approach for verification of learning outcomes achieved.
Compared to the legislation and regulatory guidance that was in place previously, the current CPD Standard is less prescriptive around financial product knowledge areas (set out in ASIC Regulatory Guide 146) with more onus on individual advisers to recognise and work on their own development needs and objectives. Of course, licensees can overlay their own more specific requirements in these areas.
Licensees are also required to notify ASIC of any instances of non-compliance with the CPD Standard. An adviser’s non-compliance is then published on the ASIC Financial Adviser Register and is therefore visible to potential clients.
The Code of Ethics
Since 1 January 2020, the Adviser Code of Ethics has been in force. The Code is made up of 12 standards covering ethical behaviour, client care, quality process and professional commitment, and is underpinned by five values: Competency, Diligence, Trustworthiness, Honesty and Fairness.
The Code is not intended to operate as a prescriptive set of rules or a compliance checklist but is a set of principles and core values intended to shape and reinforce ethical conduct. Advisers are required to use their own professional judgement in applying the Code to particular situations.
Standard 10 of the Code of Ethics requires advisers to develop, maintain and apply a high level of relevant knowledge and skills. Compliance with the CPD Standard will go some way towards meeting Standard 10, as will compliance with the FASEA Education Standard (another of the five Professional Standards). The FASEA guidance on Standard 10 states that, in applying relevant knowledge and skills, it is expected that advisers will only provide advice in areas they have the necessary skills and competencies to do so in a professional way. As an adviser, this requires self-reflection and an awareness of your own limitations.
If you’re a member of a Professional Association, you may have further CPD requirements that are set by the particular association. For example, the SMSF Association requires specialist members to complete at least 90 hours of CPD each triennium, with a minimum of 25 hours per year. Activities may be accredited (unlimited) or non-accredited (capped at 30 hours per triennium) and focus on specific knowledge areas. The Financial Planning Association also has a CPD Policy that has been designed to allow its members to comply with the FASEA requirements, while going further in some respects.
What if you also provide Tax (Financial) Advice?
The Tax Practitioners Board (TPB) sets the Continuing Professional Education (CPE) requirements for Tax (Financial) Advisers under the TPB’s Code of Professional Conduct. These are separate from and apply in addition to the CPD and Code requirements of the Adviser Professional Standards outlined above.
In summary, the TPB’s CPE requirements include the following requirements:
- Tax (Financial) Advisers must undertake a minimum of 60 hours in the 3-year registration period, including a minimum of 7 hours each year.
- The CPE completed should be relevant to the tax (financial) advice services provided by the registered Tax (Financial) Adviser.
- CPE activities should be provided by people or organisations with suitable qualifications and/or practical experience in the relevant subject area.
- Types of CPE activities can include:
- seminars, workshops, courses, lectures and training
- structured in-house training, conferences, discussion groups and webinars
- tertiary courses and educational activities, including distance learning
- up to 25 per cent of technical or professional reading.
For Tax (Financial) Advisers who are members of professional associations that have their own CPE requirements, the TPB will accept compliance with the association’s CPE requirements as meeting its requirements, so long as it meets the TPB’s ‘Types of CPE activities’ requirements.
The TPB does not accredit or approve CPE activities. Registered Tax (Financial) Advisers should exercise their professional judgment in selecting relevant CPE activities. In practice, as with the Professional Standards, a licensee may overlay its own requirements.
Further change is on the horizon
On 11 Feburary 2021, the Tax Practitioners Board released an exposure draft of a new CPE Policy for Registered Tax (Financial) Advisers.
Key changes to the TPB’s CPE policy requirements proposed in this draft TPB(EP) include an increase in the total CPE hours requirement to a minimum of 120 hours over three years and an increase in the minimum CPE hours requirement per year to 20 hours. The changes are planned to take effect from 1 July 2021.
Feedback on the exposure draft was due 11 March 2021, and we expect that a key point of feedback from industry relates to the need for harmonisation between the FASEA standard and the TPB CPE Policy.
On the broader issue of harmonising the regulation of Financial Advisers, the Government has agreed to adopt the Royal Commission’s recommendation for a single disciplinary body and, as noted in its response to the 2019 Review of the TPB, considers that the regulatory overlap for Tax (Financial) Advisers should be reduced.
The Government has stated that the new system will cover all Financial Advisers, including individual Tax (Financial) Advisers. In October 2020, the Government announced that the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investment Commission (ASIC) will take on the role of this body. The Government has stated that it intends to introduce legislation into Parliament this year. A commencement date has not yet been announced.
As part of these changes, the standards making functions of FASEA are being transferred to the Commonwealth Treasury. This provides an opportunity for the development of a single CPD/CPE standard that can be applied to all Financial Advisers, including Tax (Financial) Advisers.
What does all this mean for Financial Advisers?
At present, while there are potentially multiple sets of ongoing education and training requirements for Financial Advisers to comply with, work is underway to reduce regulatory overlap and establish a single disciplinary system for Financial Advisers.
Changes in recent years mean there is a greater responsibility on individual advisers to identify, plan for and work on the areas in which they can further develop professionally. While licensees will likely continue to use compliance tools and checklists to administer and monitor adviser compliance with the CPD requirements, it’s important that advisers view CPD as more than just an administrative task that they’re required to do each year.
The current rules give advisers scope to focus their training and education efforts on areas in which they would like to develop or improve their skills and knowledge. With an eye to the future as well as the right mindset, advisers can harness this as an opportunity to build their skills and expertise, demonstrating a commitment to grow professionally and add significant value to clients.