The lack of appropriate education requirements for financial planners has hung over the industry like a thick fog for some time now.
Over the years a majority of stakeholders have argued that ASIC's RG 146 benchmark is far too low for an industry striving towards professionalism and renewed consumer confidence. Despite all the noise around the need to increase education standards, there has been a dearth of decisive action on the matter.
However, following the FPA's decision in November last year to raise the education bar to undergraduate qualifications, with a requirement for only degree-qualified planners by 2013, it is apparent the impenetrable fog surrounding education has finally begun to lift.
Although the FPA's new education strategy has been widely supported, it's clear this new path towards professionalism will require a concerted effort from all industry participants.
While currently 14 of Australia's 38 universities deliver degree-level or above qualifications into the FPA's certified financial planner program, the association's head of professionalism, Deen Sanders, points out a current inconsistency.
"They've all developed knowledge in their own way and that's good, it leads to diversity and variability, but it doesn't allow a level of confidence in the capacity of that education to deliver the professional outcomes that we all need to give confidence to the community and to the profession about the quality of those systems," Sanders says.
"So we now want to get together with universities through the FPA Education Council and begin to map out what the broader needs are for the Australian community and how that can then guide the universities with the development of their own curriculum.
"But we're not writing curriculum, we're not demanding it. What we're talking about is a negotiated liberation with the universities about what's the appropriate content to deliver professional outcomes, which happens in every other profession."
The FPA Education Council certainly has its work cut out for it over the next 12 months. "We'd expect that all of the universities that have an interest in financial planning will engage with us in some particular way," Sanders says.
"So we'll develop a national curriculum guideline that we'll then distribute to all 38 universities, not just the 14. That exercise is at least 12 months' worth of work and we would expect realistically that degrees from about 2014 will likely to be informed by this Australian curriculum."
While this is a positive step forward for the advice industry, the fact remains that financial planning is still a niche degree in tertiary institutions, attracting only a modest intake of students per year.
For instance, the University of Western Sydney's (UWS) undergraduate degree of a bachelor of financial advising will usually garner 250-300 students, while its master's degree in financial planning will draw around 100 postgraduates per year, UWS head of bachelor of financial advising Sharon Taylor says.
"Now those numbers don't sound a lot when you look at some big programs, but bear in mind this is very new to the university sector," Taylor says.
"There are not a lot of universities offering these sorts of programs and, of course, we need the support of the industry and the principals and the major companies to actually encourage their employees to do these programs if they want to be seen as market leaders.
"I've been lobbying for years to have this bar increased to at least undergraduate qualifications, so I hope this is a great step forward and I hope the industry will embrace it and not see it as a further burden of cost for their advisers to actually meet these requirements." Meanwhile, an obstacle universities still struggle with is the fact financial planning programs often get caught in between the faculties of accounting, economics and finance. "Whether by design or simply by scale, there are few financial planning academics around when you compare it to other established areas. We've got about five financial planning staff on ours," Griffith University associate professor of finance Mark Brimble notes.
"It's one of the biggest problems we face that if we don't have enough academics, you'll find it difficult to deliver and design curriculum and you'll find it very difficult to design a research agenda alongside."
Despite this being the current reality, Brimble is optimistic this will change in the coming years.
"Compared to where we were three to five years ago, we were really struggling to get recognition for financial planning programs in terms of industry seeking the graduates," he recalls.
"Even in terms of some of the professional areas, we've come a long way to now where there is this focus that tertiary education is going to be the requirement moving forward and that we need to build the academic culture, the number of academics and the academic research.
"Now you actually start to hear stories of more universities starting to think about and starting to develop programs, including some of the GO8 (group of eight) universities, which really wouldn't have gone near financial planning three to four years ago.
"The fact that line has been drawn in the sand by the FPA really speaks volumes to the senior staff within universities about curriculum in the financial planning area."
Furthermore, Sanders observes that more universities continue to recognise financial planning as a cross-disciplinary skill set.
"We're beginning to see some really interesting programs emerge from universities with regards to that. They're starting to set up learning teams and programs that draw on a wide body of knowledge from the university rather than just within the particular schools and I think that will evolve over time," he says.
"There's no doubt in my mind that in some point in the future we'll be seeing dedicated professional schools in universities that recognise that single traditional disciplines of the past benefit from some cross-disciplinary input."
While this is a work in progress, the FPA's new education strategy will prompt a cross-section of industry participants to work more closely with universities in the future.
AMP Horizons Financial Planning Academy has had conversations and relationships with a number of faculty heads across a number of universities that offer financial planning qualifications, Horizons director Tim Steele says.
"However, our program today is not focused on supporting the transition of university graduates into the profession immediately. Our program to date is focused on career changers that are already successful professionals but aspire to become financial planners," Steele notes.
Similarly, Colonial First State's (CFS) Institute of Advice is currently in talks with various universities about potentially partnering with them. However, the institute's head, John Carnevale, says the shortage of universities offering financial planning degrees is a current hindrance.
"If you look at the marketplace, the top 10 to 12 universities in Australia don't offer a degree in financial planning. It's more your non-sandstone universities, so if you're just relying on graduates from that, then you're not going to have your pipeline," Carnevale says. "What we've got to hope for is universities like the University of Melbourne, Sydney, New South Wales and Monash develop a degree in financial planning because then we will get a bigger pipeline.
"If we do go to market in the next 12 months, I'd hope to say that we've partnered with a major university that can offer our advisers market-leading courses. I've had universities approach me to help them build courses . so we've been having good dialogue around what that would look like.
"They'd love to partner with an organisation like ourself because if we've got 1250 advisers we're recruiting in excess of 200 a year . it makes economic sense for them to build these courses because they'll have the pipeline."
Meanwhile, vocational financial planning education providers are confident they will be able to comfortably accommodate the addition of an undergraduate degree in their educational framework. "We started our initial work on the development of the degree late last year and we will seek to have government accredit us to deliver that probably in 2012," Kaplan Professional vice-president Marilyn Hill says.
"But what we're also really focusing on is constructing career pathways so that new entrants and experienced planners can follow different pathways depending on what they want to do . we're really trying to construct a pathway that lets people opt in and out at different times of their careers."
On the other hand, Mentor Education Group managing director Mark Sinclair argues there is a current gap for existing financial advisers to have an education pathway towards the degree program.
"While they all have a diploma qualification and many have an advanced diploma qualification, what we're looking for is a pathway for those people who in a defined time period, say 2015 or later, to actually step towards bridging the gap to getting a degree," Sinclair explains.
In addition, he says he believes there needs to be much more rigour around continuing professional development (CPD), which he notes has a significant role to play in the education pathway of financial planners.
"To date CPD has been loosely regulated, there is a requirement for it but some dealer groups require their advisers to do 30 CPD points a year, others 20, some 10, and some dealer groups don't do any and they leave it up to the individual adviser," he observes.
Further to setting or perhaps even mandating targets for CPD, he says another area that requires more rigour is the actual assessment of these courses.
"Some CPD can be structured and some unstructured, so assessed or not assessed, and I think it all needs to be assessed for it to have rigour, and then the level of assessment needs to be of a certain standard," he explains.
Likewise, Carnevale agrees ongoing professional development needs to be ramped up to ensure organisations have the appropriate programs in place that cater to everything occurring in the market, such as regulatory reforms and market conditions.
"The other element of professional development is ensuring that where advisers want to continue to undertake further studies beyond minimum standards, or whether they've got a general degree outside of financial planning, is that making sure that we have got the pathways for financial advisers," he says.
"So if our advisers want to undertake a degree, whether it's part-time or a master's of financial planning that we will give them the opportunities to do that, and we'll give them guidance around what courses we believe are most appropriate for them."
While the FPA's new education requirements will boost professionalism, it's likely the degree qualification requirement for new planners will affect the association's membership numbers to some extent. "Rather than a conversation about that decline in membership, our commitment here is being able to point to a clearly professional community of financial planners," Sanders says.
"And that's certainly true that there will be plenty of people who choose not to pursue a degree in financial planning and I guess there will be plenty of people as a consequence who choose not to be identified as professional financial planners.
"To be fair as well we recognise that there will be plenty of people who want to be in that space, but for whom it's a little bit difficult getting degrees and fitting that into your work life when you're a busy professional."
As a result, he adds the FPA intends to work with universities in the area of fast-tracked master's degree programs and a range of bridging programs in order to help students achieve the necessary graduate qualifications.
"So there's a whole sweep of solutions we're talking about with the universities. There's going to be a lot of exciting and I think quite innovative education solutions to this and right now that's the conversations we're having," he says.
"I'd expect to be able to talk much more about those later in 2011 because the universities by then will have started to think how they're going to do this and started to bring in programs, at least in design phase, online."
Given that 70-plus per cent of AMP Horizons' applicants already have an undergraduate degree, Steele says the academy does not expect the undergraduate requirements to have a significant impact on the organisation's ability to recruit candidates from the market.
"I think strategically we're probably better positioned than the other institutions to be able to support the FPA's position around education and professionalism," he says.
"Based on our engagement with the FPA, it's expected that they will have a relatively broad view of what an approved degree is initially until such point in time as there are a sufficient number of universities or tertiary institutions that are offering financial planning-specific degrees."
While CFS's Institute of Advice has put initiatives in place on how it recruits across the various recruitment funnels, which include graduates and experienced hires, Carnevale expects there will be a slight shift in focus on its recruitment in future.
"Obviously it may rejig your weightings to your various funnels, so I can see in the years ahead that there may be greater emphasis on graduates rather than experienced hires because the mix will change," he explains.
"I can see that if organisations have got good pools of talent, fostering them will be important, but I think it's going to be really important that big players like ourselves really enhance the relationships that they have with universities and how they can work with them from a number of fronts.
"Obviously they'll be good for us because they'll be recruitment funnels, but we can also be good for them because we may be leveraging off their courses for advisers, so it's a win/win for both parties." While this may be the case, Brimble points out the most significant task ahead is ensuring the academic world and the financial planning industry work towards achieving a common goal in harmony.
"Because we are coming from quite a small base of student numbers and staff numbers and research activity in financial planning, if the industry wants to progress as quickly as the FPA's roadmap suggests, then there's going to be the need for a lot of cooperation across both the academic world and the industry world so that we don't end up competing too heavily with each other and rather collectively develop the infrastructure and the resources we need around curriculum and research in financial planning," he says.
Hence, the recent establishment of the Financial Planning Academics Forum, which is a cooperative of around 30 academics around Australia, is a stepping stone on the collaborative front.
"There is a group of academics that met at the FPA conference last year and we've got a first official meeting planned on Griffith campus in February. There is a whole range of things we want to achieve initially," Brimble says.
"Firstly, we want to establish a grouping of financial planning academics as a body where there are groupings of accounting experts, economics and finance experts; financial planning is not broadly seen as its own academic discipline within the universities so we want to create that grouping.
"Secondly, we want to collectively cooperate on behalf of the tertiary sector with the financial planning profession, particularly the FPA and what it's doing.
"Thirdly, we want to collectively work together to create the research agenda in financial planning, which is an important part of an emerging profession to have academic research going along beside it and supporting it."
