How to structure a professional year
New entrants to the financial advice industry will have their first 12 months mapped out by FASEA rules designed to ensure relevant skills are learned under close supervision.
New entrants to the financial advice industry will have their first 12 months mapped out under new rules designed to ensure relevant skills are learned under close supervision. Here’s how this might best work in practice.
Those entering the financial advice industry from 2020 will have their first 12 months mapped out almost to the minute to comply with new regulation. Each new entrant taken on by a financial advice business is expected to complete a ‘professional year’ before they are considered a qualified financial adviser.
The professional year requirements – set by the Financial Adviser Standards and Ethics Authority (FASEA) include 100 hours of education and training and 1500 hours of supervised work. The professional year can only be undertaken by those who have already completed a FASEA-approved degree.
FASEA has mandated a structured quarter-by-quarter work program for the 12 months after which it expects new advisers to have achieved certain levels of competence in technical matters; client care and practice; regulatory compliance and consumer protection; and professionalism and ethics. It is likely that new entrants will spend the first two quarters sitting in on client meetings and completing some paraplanning work, says Ben Marshan, the Financial Planning Association’s head of policy and standard.
“Some will be doing file notes, strategies, modelling or the Statements of Advice (SOAs) for the financial planner then later their own supervised appointments. And that’s a positive because they’re all skills that need to be learned under close supervision,” he says. For some, the professional year may take a little longer to complete because of the business shutdown during the COVID-19 pandemic.
But technology could come to the rescue. Marshan says supervisors can sit in on video calls in the same way as they do in the office.
The importance of soft skills
After successfully completing an exam, new entrants may start work in the third quarter and use the title provisional financial adviser or planner.
From this time, they may operate under indirect supervision, according to FASEA, providing they let clients know they are provisional advisers or planners and their work is being supervised.
Financial services licensees are expected to ensure that new entrants complete all of the necessary requirements and that they are supervised by those with relevant qualifications. The supervisors are also responsible for ensuring the new entrants meet all of the requirements.
Log books or journals showing the nature of work and time spent as well as the education and training need to be completed by licensees, supervisors and new entrants and stored for seven years.
FASEA provides templates to give examples of the recordkeeping requirements.
The new entrant can operate without the ‘provisional’ title when they can show they have completed the requirements of the professional year and after their licensee has audited five of their client files.
The professional year’s structured program makes sense to help new entrants understand the business, says Phil Anderson, the Association of Financial Adviser’s general manager policy and professionalism.
He adds that soft skills – building and managing client relationships and communication – are particularly important.
“The key is to make sure that people can work well with clients to understand their needs and ask the right questions.”
The new professional requirements may be challenging for some licensees, particularly small businesses, because of the significant commitments required, says Professor Deen Sanders, a former FASEA CEO and now ethics and professionalism leader at Deloitte.
“The requirements are as much about licensees as about the new entrants. The licensee has a duty to support the new entrant with the right resources and a very structured program that needs careful attention. Then they must ensure that the person has met the requirements,” he says.
Sanders is of the view that the licensee’s responsibility is most acute at the end of the professional year.
“They are the ones essentially authorising that person to operate as a financial adviser in their practice. And that authorisation is profoundly important. It’s the licensee saying I now trust this person, and I’m putting my license on the line to say that this person is able to sit in front of clients and give them financial advice,” Sanders says.
“It’s basically saying we now need to treat people that come into the industry as genuine students, as people that we are building up and having complete confidence in by the time they complete it.”
Anderson agrees, saying the professional year is a valuable improvement for the industry by making sure that new advisers are properly trained and not left to their own devices as they navigate their first year.
For Marshan, the professional year is one of the “big positives” to come out of the wide-ranging changes to financial advice legislation.
“Every financial planner coming in will be properly supervised, trained and given a good year of solid experience and mentoring so they can grow into the profession of financial planning,” he says.