Australia-opera-house

An experienced CFP who holds a business and economics degree. A person who does more than double the CE requirements each year and has a graduate diploma in financial planning.

Not good enough, says Australia.

Starting in January 2019, Australian advisers must have an approved financial planning degree and pass a competency exam to enter the business; existing advisers without an approved degree have until 2024 to either get one or take bridging courses, and they’ll also have to take an exam by 2021.

The details are still being finalized, but based on the current proposals, our two enviably qualified advisers told the Financial Services Institute of Australasia (FINSIA) in a June survey that they have unapproved undergraduate degrees.

And you thought banning embedded commissions would shock the system.

As the industry digests the Canadian Securities Administrators’ client interest reforms from June—proposals that “extend beyond conflicts of interest arising from embedded commissions” and cover “all types of conflicts that can incentivize poor registrant behaviour and subvert investor interests”—it’s worth looking at how the other side of the world lives.

Australia has been living the Future of Financial Advice (FOFA) reforms since 2012. You’ve likely heard that the FOFA legislation has banned “conflicted forms of remuneration,” a.k.a. trailers; imposed a best interest duty; and expanded fee disclosure requirements. An organization called Adviser Ratings (more on it in a moment) has found that nearly 7,000 Australian advisers have left the industry since 2015. As of March, the country only had about 21,500 advisers altogether, a figure that included accountants.

The herd will get thinner. In FINSIA’s survey, 18.6% of respondents said they’d quit the industry when the minimum education requirements take effect, with another 34.7% unsure. In May, Adviser Ratings warned that “14,000 advisers will exit the financial advice industry over the next five years, representing [AU]$900 billion of net client wealth in transition.”

Who is Adviser Ratings? Operating since 2014, it’s been called TripAdvisor for advisers. International Investment reports Adviser Ratings is consulting with the Australian government, regulators and industry to develop a system that can predict licensee actions “that are detrimental to client’s interests, primarily misconduct.” The company’s site already includes proprietary and crowdsourced ratings for more than 24,500 current and former advisers.

The reforms continue. On Aug. 3, the country’s Productivity Commission released proposals to rename the term “general advice,” which currently refers to non-personalized info from sources such as news articles, bank tellers and ads. The word “advice” should only refer to information tailored to a person’s circumstances, the commission says. Further, all banks would have to appoint an independent Principal Integrity Officer, who would be accountable to the regulator and the bank’s board.

Compared to what’s happening in Australia, CSA’s June missives are meek.

Oz-style reforms won’t reach our shores anytime soon, but we can learn from Australia’s steps and missteps. A mass exodus of advisors is what CSA was trying to avoid when it shifted its focus from embedded commissions. And while we’ve argued for minimum educational standards on this editorial page periodically, it seems Australia could be more generous in its grandfathering. As one of the two qualified advisers put it, “Having a degree in financial planning does not mean that as a financial planner you […] will suddenly [become] ethical.”

Maybe not. Nor can you legislate ethics. But resisting the principles, if not the substance, of relatively softball reforms like June’s keeps Canada behind its international peers, and keeps the industry from being fully recognized as a profession.

You have until Oct. 19 to comment on revisions to NI 31-103. Keep in mind, it could always be worse.

Statement of Ethics

In June, Advisor’s Edge published a Statement of Ethics that explains how we preserve editorial integrity. The principles within reflect common journalistic practices and have always underpinned our operations, but we wanted to share them publicly for accountability and transparency. The statement has been endorsed by all TC Media publications and the president of TC Media. Read it at Advisor.ca/statement-of-ethics.

Melissa Shin is Editorial Director of Advisor’s Edge. Email her at melissa.shin@tc.tc.