Speaking in her new role as minister for financial services, former assistant treasurer Kelly O’Dwyer confirmed all new advisers will need to sit an exam, complete a professional year and comply with a code of ethics from 1 January 2019 after passing a relevant degree.
"It is in everyone's interest that Australians are receiving high-quality advice from high-quality advisers," O'Dwyer told the Financial Services Council Leaders' Summit 2016 in Melbourne on Thursday.
Meanwhile, the new professional standards body will be responsible for developing and setting the industry exam, developing a code of ethics, and determining the education requirements for both new and existing advisers.
Existing advisers will have until 1 January 2024 (five years) to reach the new degree‑equivalent status and until 1 January 2021 (two years) to pass the new exam. However, O’Dwyer also made it clear that the standards body will have the power to exempt some existing advisers from the new qualification requirement on a case-by-case basis.
The government also plans to extend the financial adviser register in a bid to improve accountability and transparency and consumers make informed decisions about choosing a financial adviser.
“As an industry we need to fight harder than ever to win clients trust and if in their minds that means that every adviser needs to be a degree holder then so be it."
The news comes just weeks after the re-election of Malcom Turnbull as Australia’s prime minister, despite controversy over superannuation changes bringing the lifetime non-concessional cap down to A$500,000 (£260.5k, $381.2k, €331.9k) from A$180,000 a year.
Initially scheduled to come into force on July 2017, the new minimum education requirements were pushed back to 1 January 2019 when the government presented its draft legislation in April.
"We recognise that existing advisers will need to balance any further education requirements with the demands of continuing to provide high-quality financial advice to their clients. Existing advisers therefore need sufficient time to meet the new standards,” she said back in April.
Brett Evans, founder and group managing director of Australian IFA firm, Atlas Wealth Management told International Adviser the changes are “a step forward” for the industry.
“There will always be a period of adjustment, especially for industry practitioners who have been in the industry for a number of years who don’t have the required qualifications, but I feel the line has to be drawn at some point.”
He described the industry as facing a “generational shift”, adding that advisers now need to work harder to win client’s trust.
“As an industry we need to fight harder than ever to win clients trust and if in their minds that means that every adviser needs to be a degree holder then so be it.
"Industry experience certainly counts at the end of the day and there are plenty of older advisers who don’t have any qualifications who are amazing advisers but as an industry as a whole we need to make this generational shift and lift the bar," said Evans.