The move follows a series of allegations and claims against the country’s big banks and its largest insurer AMP, which are responsible for providing a large part of the financial advice available to ordinary consumers, about providing poor service and even charging for services not delivered.
The minister for revenue and financial services, Kelly O’Dwyer, said in a statement on Monday that the government will present legislation to parliament later this month to set up the new professional standards regime, which will formally commence on 1 January 2019.
The proposed new standards watchdog will ultimately be responsible for developing and setting an industry-wide exam, developing and monitoring the proposed code of ethics, and determining the future education and development requirements for both new and existing advisers.
The new body will have a chairman and directors appointed by the government but will be funded by the big banks and AMP. O’Dwyer said once the new standards body is operational, the government will take steps to develop an ongoing industry funding model for the body.
Under the new system it will be compulsory for all new and existing advisers to sit a single uniform exam aimed at setting a common degree-level educational benchmark. Existing advisers will have until 1 January 2021 to pass the test and until 1 January 2024 to reach degree-equivalent status.
The proposed professional standards legislation will also include a supervision requirement for new advisers and an ongoing professional development component.
The standards body will have a nine-member board with three consumer advocates, three industry members, an ethicist, an education specialist as well as the chair. Australia’s professional associations, such as the Financial Planners Association, will compete to run the body.
Code of ethics
Compliance with the planned new code of ethics for advisers will be monitored by a group of professional organisations and third party bodies under the aegis of the corporate regulator ASIC. Non-compliant advisers will be subject to disciplinary action and sanction by the monitoring bodies.
“This independent standards body will raise minimum standards in the financial advice industry and improve public confidence in the sector,” O’Dwyer said.
“The Government will introduce its legislation on the reform package into Parliament following final consultations with industry and consumer groups later this month,” she added
The Australian Bankers’ Association has welcomed the new legislation and the creation of the new independent standards body.
“This is an important step in the professionalisation of the financial advice industry,” ABA executive director – retail policy Diane Tate said in a statement.
“Customers rightly expect to receive high quality financial advice to help them maximise their savings, build their wealth, plan for retirement or help manage their money in retirement.
“The new education and professional standards framework will mean we have more competent financial advisers who meet higher standards of ethics and conduct,” she said.