The commission has heard multiple examples of poor financial advice adversely affecting Australians, to the point that lawyers are now circling AMP in the hope of launching a class action.
No doubt such scandals have boosted support for improved accreditation and education standards for advisers.
However, John Low of industry insights firm Skilful Analytics said such changes will impact more than 17,000 advisers nationally and cause many to leave the industry altogether rather than meet the new compliance rules.
According to Mr Low, 48 per cent of financial advisers do not currently hold a university degree, and a further 21 per cent do not hold a degree in a related field.
On 19 March this year, the government’s Financial Adviser Standards and Ethics Authority (FASEA) announced plans to raise this threshold with a degree equivalence program, and require all advisers to complete a tailored Code of Ethics course.
Advisers will have five years to meet the training requirements.
“The impact of the adviser education reforms is immense with around 12,000 advisers requiring significant further study if they don’t hold a bachelor degree,” said Mr Low.
“That is nearly half of the industry requiring to complete a Graduate Diploma or equivalent before January 1, 2024.
“Even those with a Bachelor Degree face uncertainty. Based on the qualification details in the ASIC Financial Adviser Register, around 5,200 advisers, which equates to 21 per cent of the advisers in the industry, don’t hold a relevant degree, which means they may also need to complete a Graduate Diploma or equivalent.”
While improved education and training would undoubtedly benefit the perception and effectiveness of the scandal-plagued industry, Mr Low argued it could also lead to a mass exodus of advisers.
“The industry will lose experience with advisers that are nearing retirement more likely to opt to retire rather than undertake more study. There are around 1,000 advisers with more than 30 years of experience without a degree,” he said.
“This may result in substantial leakage from the industry with advisers opting out rather than continue with further study, especially those with decades of industry experience.”