In a statement on Wednesday, financial services minister Kelly O’Dwyer, confirmed that the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 has been introduced into parliament.
Under the new system, set to start on 1 January 2019, it will be compulsory for all new and existing advisers to sit a single uniform exam aimed at setting a common university 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 new standards will also include a supervision requirement for new advisers and an ongoing professional development component.
Independent standards body
O’Dwyer added that the government will also establish an independent standards body to administer the new regime to oversee the country’s 22,500 financial advisers.
The new watchdog will be responsible for developing and setting the industry exam, developing the code of ethics and setting the education requirement, including working with education providers to establish appropriate courses, the statement said.
The body will be funded, both initially and on an ongoing basis, by the industry.
Dogged by scandals
The financial advice overhaul is set to shake up the industry, which in recent years has been dogged by mis-selling scandals and dodgy practices.
These have often been carried out by the country’s largest banks – Common Wealth Bank Australia, ANZ, NAB, Westpac – which provide the bulk of financial advice in Australia.
Last month, financial services regulator, the Australian Securities and Investments Commission (Asic), told the country’s ‘Big Four’ banks and leading wealth manager AMP to repay at least A$178m (£111m, €125m, $136m) to more than 200,000 customers after charging them for financial advice they did not receive.
At the time, Asic said that for many years the financial advice industry has taken advantage of automatic deductions from customers, many of whom are “passive” customers who don’t get regular advice.
The banks have also repeatedly come under fire for abuse of market power following investigations into misleading financial advice, insurance fraud and interest-rate rigging.
Just four days of training
O’Dwyer said existing requirements had allowed some to become qualified to provide financial advice to people after only four days of training.
“There is also no specific requirement currently for advisers to undertake continuous professional development.
“These reforms will deliver significant benefits to consumers by building trust and confidence in the financial advice industry,” she said.