Lifting education standards and the need for financial advisers to invest in their own professional development were some of the key messages emanating out of the Ripoll review.
While the next 12-18 months could not only see changes to the educational standards for individuals entering the financial planning field but also the ongoing requirements for qualified practitioners already working in the advice sector, it seems the industry is already beginning to pull up its socks in this regard.
"This whole drive around the Ripoll review and lifting the bar and raising standards is starting to bite. People are understanding that they've got to get back in the saddle and learn," Association of Financial Advisers (AFA) chief executive Richard Klipin says.
"Professional development, education and higher standards are very much the theme for 2010 and beyond."
Colonial First State distribution general manager Paul Barrett shares this sentiment. "There is a general awareness of the need to continue to invest in yourself as a planner and to invest in keeping current," Barrett notes.
"Advisers are asking us what our plans are to continue to drive higher standards. So there's a general appetite for us to do that.
"Has the recent turn of events spurred that on? Well I suppose it's brought more of a focus to it, but I have to say irrespective of global re-regulation, including domestic re-regulation, these sorts of initiatives I believe would have happened anyway.
"I think it's a natural progression to professionalism and I'm not sure we needed a global financial crisis to highlight that."
While there have yet to be any firm decisions made around what the appropriate entry-level educational requirement should be, the industry is certainly keeping a keen eye on any decisions ASIC makes in relation to RG 146.
"Any discussion around that will be interesting because it will certainly raise the dust again on the issue of entry-level education," FPA deputy chief executive Deen Sanders notes.
ASIC's review is timely considering some industry participants believe the current entry-level standard of education is in a state of disarray.
"Unfortunately when we look back in hindsight the entry level of RG 146 when it was introduced in 2002 really wasn't high enough," Institute of Chartered Accountants in Australia head of financial planning Hugh Levy says.
"So we've got some really big steps in going forward and big decisions that will have to be made."
Pinnacle Financial Services Academy managing director John Prowse agrees. "The entry-level standard needs to be properly nailed down and at the moment it's far from it because we're allowing quite appallingly low standards on the initial qualifications," Prowse says.
While a financial planning diploma is supposed to be equivalent to a third of a three-year bachelor degree, Prowse argues the industry has not only accepted but even partly encouraged providers that offer diplomas to students in as little as eight days of training.
"The difficulty at the moment is that standards are not being enforced and yet all of the push seems to be on changing the actual standard. And of course if you're not prepared to enforce a standard, there is no point in changing the standard," he says.
"The standard has completely failed in financial planning, so if you're a dealer and you're wondering whether this adviser walking in with the RG 146 sign-off knows what they're talking about or not, you must make an inquiry about where they've done their training.
"Because if they've come from one institution they've done a fortnight, and if they've come from another they've done 12 months."
However, he observes dealer groups often line up in two separate camps in their approach to education of their adviser base.
"Some just still want investment salespeople who get their RG 146 sign-off as quickly and as cheaply as possible, and of course there are other dealer groups who make an honest job of trying to ensure their advisory force is well qualified and well trained," he says.
"But just the other day I had a dealer group ring up and say: 'We've got a group of people, we need them RG 146 compliant, how quickly and cheaply can we get it done?' "Now, we lose that business because there are providers in the marketplace that are prepared to cater to that market and they should not be allowed to."
Elvy concurs an education anomaly exists. "There currently is a real disparity and range of how quickly you can go through a course," he says.
"In developing a professional relationship with an adviser, one of the difficulties in the financial planning industry is there's such disparity in the education levels of the advisers.
"But as the financial services industry grows and there is greater demand for financial planners, then the dealer groups and financial institutions are looking for more planners and they have to get them from somewhere."
The challenge, therefore, is about how the industry sets in place a robust educational framework to ensure that those students graduating from it are appropriately trained, he says.
However, Prowse points out there are two issues when establishing educational standards.
"The first is to set the standard and the second thing is to enforce the standard. At the moment the standard for entry as a financial planner is the diploma-level standard," he says.
"There is some push on from various places to make the standard a university degree, but I think that's quite an inappropriate standard because it will exclude a lot of people who could otherwise enter the industry."
While Elvy is in support of the university degree standard, he admits the barrier to entry is a potential issue.
"But I think the financial planning industry as such needs to look at it and say, 'well what are we trying to promote' and put forward to the Australian public that these financial planners are professionals and they've got this consistent high-quality education behind them," he says.
The financial planning industry could learn some lessons about implementing education standards from the accounting profession, according to Barrett.
"They've been very successful working with the universities to ensure that there's a consistent high standard applied across all universities when it comes to the faculty that teaches accounting," he says.
"The same thing needs to happen in the financial planning space and it's going to take a collaborative effort between the FPA and the big dealerships to make sure that that happens."
When building a robust education curriculum, Klipin highlights two key areas the industry must address.
"The big question in education is you've got to think with the end in mind, and that's what kind of experience do consumers want to have when they're working with their adviser?" he says.
"Then the second question you ask is if that's what they're after, what are the skills sets that advisers need to have in order to deliver that? Answering those two fundamental questions gives you an opportunity to build a curriculum and a skill.
"But the industry needs to agree on what those client experience issues are so that we can in a sense agree what a national adviser curriculum looks like and I think that's obviously a challenge for us all."
The continuing professional development (CPD) of an adviser has also come more sharply into focus as a critical component of being a professional practitioner.
While ASIC's definition of professional development in RG 146 outlines that advisers are required to maintain, update and develop their competencies, Prowse argues this description is one a majority of the industry seems to overlook.
"That's a fantastic definition of professional development that almost everybody seems to ignore," he says.
"They are three quite separate streams and it is a very rational division." However, he observes a common problem is the industry's focus on the third part of that definition, which revolves around developing competencies.
"To me the two really important things are that the original competencies that they learn in their courses are maintained. It's only after you've got those two guaranteed and nailed down and procedures to enforce them do we then start worrying about whether people get extra, deeper professional expertise," he says.
"The FPA doesn't seem the slightest bit interested in maintain and update. The whole of their concentration seems to be on this question of providing richer, broader, diverse educational experiences, which is really just that third leg."
Sanders refutes this, noting the FPA does in fact encompass all three areas. "We encourage people to certainly maintain and update as much as develop new areas of competence and capacity," he says.
"Education is multi-dimensional and people do need to grow and develop their competence in new areas, but they certainly have an obligation to maintain the currency of their existing knowledge. That is what a professional obligation is and we certainly have that.
"Whilst we do identify that there are new areas of reflective practice and critical thinking, there clearly is an important and necessary demand for people to maintain the currency of their technical knowledge and that's a vital part of any professional expectation and it's an important part of our CPD expectation."
While Pinnacle provides ongoing CPD to a number of dealer groups and advisers, Prowse says the majority just view professional development very reluctantly.
"It's a matter of just getting points to satisfy an organisation and what they're interested in is just whatever's easiest to complete for their maximum number of points," he says.
"The ones who seem to be more genuine about professional development are most interested in technical topics, for example, the latest strategy in self-managed super funds. The soft skills of the planner seem to be the least popular courses and arguably that's where the most need is."
Elvy shares this view, noting a broader issue for the industry to address is the need to move on from just looking at the technical aspects of education.
"You've also got the soft skill and practical aspects, which really need to be incorporated into the whole education framework," he says.
Higher academic standards must be accompanied by compulsory training for all new entrants in a solid ethical framework, he says. "That's an overarching issue for the industry to address because some of the fallout from the various corporate collapses, it would appear that some of those who were providing the advice were technically competent people but they seemed to be lacking an ethical component there," he says.
This ethical training must start at a grassroots level, he adds. "You actually need to start the education of ethical issues from day one and also incorporate that into the practical component as well," he says.
On the other hand, Sanders observes the FPA has received increased enthusiasm for advisers wanting to engage in ethics programs.
"There have been some very interesting shifts and growth in CPD activity right across the profession and that's a really exciting thing to see," he says.
"There are lots of new programs coming to the marketplace and lots of new opportunities being given to financial planners to expand their knowledge."
Estate planning is one particular area of learning that has garnered much interest from advisers.
"We've certainly seen enormous enthusiasm for our estate planning specialist program, so that's been quite an exciting introduction to the professional designation for financial planning," Sanders says.
Elvy says the institute has also experienced this trend. "We're providing a lot of seminars and courses on issues such as estate planning. The superannuation courses have had the greatest demand, so those are the areas we will specifically be working on," he says.
With an ageing population and retiring advisers, succession planning is another area of constant interest for planners.
"We are seeing a very strong growth in succession planning programs and also in people wanting to professionalise and skill up to make sure that they're ready to step into the shoes of practices that are looking to pass their businesses on," Sanders says. Barrett agrees. "There's absolutely no doubt that succession planning would probably be in the top one or two issues for just about every large-scale dealer group in Australia," he says.
"With education standards going up, you have to be careful how far you raise them because you don't want to cut off the supply of quality people into the industry, because then you actually have more of a succession planning problem."
The FPA has also seen ongoing commitment from planners for learning in areas such as lead generation, interpersonal skills programs and effective client management.
"I think there is a real appetite amongst the professionals in the community to look outside their licensee's stable of offerings for education that grows them," Sanders says.
Education is ultimately the responsibility of everyone involved in all parts of the value chain, Klipin adds.
"So at an association level it's incumbent that we have a clear pathway to education, and equally within dealer groups and licensees that they have their own standards and own requirements," he says.
"We're all in conversation with each other so that together we can lift the bar and lift the experience that consumers get from working with advisers."
He says it is also important to have a clear pathway of education that caters to the different segment of advisers in the market.
While new entrants to the sector were armed with university degrees but required training and experience in soft skills, Klipin points out advisers in the 30-55 demographic were definitely in the market for additional educational ventures to lift their game.
As a result, the AFA is in the final stages of developing a new educational offering for its members, which it expects to roll out by the end of April.
The program, Campus AFA, includes a range of offers that cater to each different segment of the association's membership base.
"So if you're a young adviser, then there will be a program for you. If you're an adviser that wants to specialise in insurance, there will be a program for you. If you're a general practitioner, then there will be a program for you. If you're a support person in a financial adviser's practice there will be a program for you," Klipin says.
"Formal education targeted at the stage of the adviser's business and at the stage of their career development is an important requirement for an association and I think Bernie Ripoll certainly put it on the radar in his parliamentary report."
The AFA is also looking to take its Secrets of Success (SOS) initiative, which focuses on the transfer of knowledge and a mentoring relationship, to the broader market.
"SOS now has about 40 to 50 relationships between mentors and aspirants that are happening right around the country. We can't forget that that's a key part of learning as well," Klipin says.
Meanwhile, the Institute of Chartered Accountants is in the process of conducting a review of its educational framework during the course of this year, which will include reassessing its financial planning educational offerings to meet member demand.
In the past 12 months the institute has received increased inquiries from members about the educational requirements they need in order to incorporate financial planning into their accounting practice, Elvy says.
"The review will be looking at it in terms of what we're providing and we'll also take into consideration the backgrounds that chartered accountants have actually got so that the education we're providing them isn't repetitive and really complements what they already have on board."
On the other hand, Sanders would not elaborate on key educational initiatives on the FPA's agenda this year.
"We'll make a statement about the initiatives that we want to achieve at the back end of our white paper consultations, which close at the end of March," he says.
The Investment and Financial Services Association's (IFSA) focus is on running broader issues-based education events during the year to update and engage its members on industry and regulatory issues. IFSA chief executive John Brogden says the association runs a series of four leadership lunch programs a year, which anywhere between 100 to 500 members attend.
"At the first lunch for this year we will have Assistant Treasurer Nick Sherry update our members in detail on where the government's at in respect to treasury matters and possibly something on what Ken Henry is doing with his tax review," Brogden says.
"We're also holding a post-budget breakfast where Chris Bowen, the Minister for Financial Services, will be speaking to our members and outlining details relevant to the financial services sector."
IFSA also runs around 30-35 key issue presentations a year for its members, he adds.
"These presentations cover key issues happening at the time, so relevant industry, regulatory, business and industry issues. Around 50-200 members attend; it just depends on the issue and the relevance to members."
Furthermore, student enrolments are also on the increase for the various education programs advice associations provide their members.
The FPA has experienced a 15 per cent rise in planners enrolling in its certified financial planner (CFP) designation this year.
"We're actually just closing an intake on CFP certification now and it has exceeded our expectations, with more than 230 people applying in this trimester," Sanders says.
With 52 knowledge subject areas in the CFP designation, he says there are constant enhancements made to the curriculum.
"CFP is a program that is constantly under review because it needs to be topical, it needs to be current and it needs to obviously cover those issues that are most significant in the industry at the time," he says.
Klipin says enrolments for its fellow chartered financial practitioner (FChFP) designation have risen in the past 12 months.
While the AFA now has 50 graduates of the FChFP designation, it recently rolled out the program to its younger membership base.
"We got tremendous expressions of interest at our recent GenXt roadshow, with 130 members interested to pursue the FChFP," Klipin says.
Some dealer groups are also working towards lifting the current educational standards for their advice networks.
Colonial First State is particularly focusing on its advice academy this year, which Barrett describes as an institute of knowledge that will help improve the educational standards of its planners.
"It's a centre of excellence that's going to focus on recruitment, induction, professional development, continuing education, undergraduate studies, postgraduate studies and specialist accreditation," he says.
"But we can't just focus on adviser education alone. We have to also focus on support staff education and on consumer understanding.
"So we'd like to build an ongoing education program for clients to provide them with an understanding of investment markets and of financial planning so that they can self-diagnose when they're going off-track.
"If a client is able to do that, they're going to be far more engaged in the financial planning process."
To date, he says the academy has invested in specialist pathways around direct shares and superannuation, and has struck up a lengthy dialogue with a number of universities around the creation of the academy's undergraduate and postgraduate studies.
"We're going to be making these sorts of options available to our planners, but it's a work in progress at this point. We expect to have that completely designed by the first half of this year and start rolling it out in the second half of this year," he says. It seems fund managers are also lifting their game when it comes to educating advisers, providing them with more than just a helicopter view of complex financial products.
For example, Perpetual recently teamed up with Kaplan to design an online training course for its structured product series.
"It's a minimum knowledge test that an adviser has to pass before they can register to distribute this product," Perpetual Investments group executive Cathy Doyle says.
Perpetual is looking at providing broader educational seminars either through the FPA or with Kaplan for all products that are more complex or have a higher risk.
"I think any investment house that does complex products may find even bottom-up pressure from advisers saying, 'you've got to help me explain this' or 'what are the minimum things I need to be across'," Doyle says.
"Their jobs are moving so fast with the changes in both the regulatory and superannuation environment that where you provide them an educational opportunity to show their clients they have covered off a certain standard to understand a product, they feel more comfortable and so do their clients."
As educational standards gradually lift, there is much talk of a potential exodus of advisers from the industry.
Despite the predictions that a major catalyst for adviser departures will be education, Barrett does not believe this will be the case.
"Firstly, advisers have proved time and time again to be very resilient. A lot of people predicted massive reduction in adviser numbers when FSR (financial services reform) came in but that didn't really happen," he says.
"The vast majority of advisers that I talk to are saying, 'bring it on, we want assistance but we're ready to continue to invest in ourselves'.
"Secondly, the big, well-resourced institutions will be able to provide the appropriate training and development to enable people to continue to grow, and for that matter I think the boutiques will be well positioned too."
Sanders says: "We would expect that if you are a professional, you can demonstrate your professionalism and your current competence, then you have every right to stay in the industry and provide professional advice."
