Jerry Parwada

The debate about a national exam for financial planners misses the point that there is already a benchmark for professional standards for the profession.

Universities across Australia offer undergraduate qualifications in financial planning.  Some, such as UNSW, offer a master of financial planning. In fact, the Business School at UNSW was the first among the Group of 8 universities to offer the course when it began three years ago.

While the focus of the present political debate is around the need for an exam at all, I suggest the Australian Securities and Investments Commission (ASIC) take advice from universities and other neutral bodies that do not have a vested interest.

Evidently, ASIC is not the body to ensure that a national exam reflects state-of-the-art financial issues and industry practice. Nor can it keep up to date (or deliver) the examination content and training required to meet minimum professional standards.

To this end, it should do two things – establish an education council (spearheaded by universities and with significant industry participation) and hold a summit to seek input from across industry and education providers into the training systems required.

The federal government (and ASIC) should avoid pandering to the market. The present debate is polarised by vested interests and taking place in a poisoned atmosphere where the industry is controlled by the big planning groups and players lacking higher qualifications are resisting professionalisation.

Financial planners with a university master’s degree that focuses on longer-term planning will ensure a higher level of professionalism.

As individuals, financial planners need to decide if they will make a long-term investment in higher qualifications or pander to the short-termism that is the practice across much of the existing industry.

That future is coming. It might not be today or tomorrow, but it is definitely coming. Investors are becoming more savvy, markets more attuned to international best practice and there are massive amounts of assets under management, mainly because of compulsory superannuation.

This makes the outcome of this debate a significant economic issue for Australia – it is no longer about just convincing mum and dad investors to seek financial advice for their retirement. It is about an investment management industry that is about the fourth-largest in the world (behind the US, UK and Japan) – a behemoth that needs professional advisers that add value and not just feed from the lucrative fee trough.

In the long term, a parallel system could operate, with graduate and postgraduate qualifications sitting alongside a requirement for national entry exam. This would be similar to what already occurs elsewhere in the financial services industry where upwardly mobile professionals complete a CFA exam but often also undertake a master of finance.

In Australia, we also need a comprehensive register of financial planners so that we complement advances in adviser training to improve standards in the industry. This literally means nobody without ASIC recognition via the register hangs a shingle and starts advising clients.

Potential investors should be able to check the bona fides of their financial planner – not via ASIC’s simple RG146 list which was considered sufficient in the past. Ideally, financial planners would be required to disclose not only qualifications and history but also their institutional affiliations and any past professional and criminal misdemeanours. Without this, I would question the efficacy of having a national exam at all.

Universities deliver fundamental education and many have steadfastly resisted coming up with training courses that feed into the current sales-based financial planning culture that infects much of the industry.

Under the spectre of deregulation of higher education fees and the present market spotlight on financial planner education standards, many universities offering financial planning qualifications have or will be approached by organisations wanting to make a quick buck.

Some are not even course providers themselves but want to act as brokers, trying to convince universities to downgrade standards or offer excessive exemptions and credit for years of experience alone or lower-level previous qualifications.

The present system of training financial planners is tainted and higher education providers should resist being used to rubber-stamp these failed systems (retrospectively) to give them credence. There is no point to be used merely as a branding mechanism where credibility is obtained by an affiliation with a respected university.

Jerry Parwada is an associate professor of finance and head of the school of banking and finance at UNSW Business School.