Anthony Klan, government-certified, ‘nationally accredited’, financial adviser. Source: TheAustralian
HAVE a spare few thousand to *invest? Better yet, $10,000, $100,000 — more?
Need your financial future mapped out and advice on where to invest your nest egg (plus all the fees I can extract along the way of course)? Roll up, roll up. I’m a *government-certified, “nationally accredited”, financial adviser with a “diploma of financial planning”.
No exams, the course completed entirely online and “open-book” — and with no requirement for a high school certificate (or even a passing grade in primary school for that matter) — and I’m a fully certified financial planner.
I have met all the education *requirements set by corporate watchdog the Australian Securities & Investments Commission to steer the fortunes of Australians seeking professional help. And all in the equivalent of four days’ work.
The diploma cost $1425 (more than double, $2950, if you sign up to a handful of face-to-face workshops). The $1425 includes “both personal and general advice”, a distinction that has chewed up its fair share of parliamentary and media time this year.
But wait, there’s more.
For an extra $175 — and “an extra 30-40 minutes of reading time”, I am told by the education provider — I could also become a provider of self-managed super*annuation fund advice.
The government and ASIC have long expressed concerns about widespread future problems with the rapidly growing SMSF sector.
I’m now also a fully certified provider of SMSF advice.
QUIZ: Can you answer questions from the Diploma of Financial Planning Course?
Both the financial planning and SMSF education requirements are set by ASIC under its so-called “RG146” guidelines — the providers follow suit and create courses to meet the requirements.
ASIC has been well aware of the woeful standards set by it under RG146 for many years — and has been promising an *improvement for almost as long, but still nothing concrete has *happened.
This week, in its second submission to the financial services inquiry, the regulator suggested improving the training of financial planners.
But it has made no suggestions as to how it will improve its own embarrassingly inadequate requirements, only suggesting a *“national exam be set”.
After many years of intense pressure from consumer advocates, ASIC this week recommended advisers be required to hold a university degree.
But it has conspicuously fallen short of calls for financial planners to at least hold “relevant” degrees, such as in law, accounting or *economics, or to state what type of degree be required, or how it will handle the many thousands of *financial planners operating *nationwide without degrees.
Financial planners/advisers (the terms are interchangeable) have been involved in almost every major corporate collapse of the past decade.
Westpoint, Storm Financial, Fincorp, Australian Capital Reserve, Banksia Securities, MFS, City Pacific, Prime Trust, Great Southern, Timbercorp and scores of other collapsed companies all relied heavily on raising money via financial *planners.
The Association of Independently Owned Financial Professionals estimates “product failure, impaired structures and frozen funds” have exceeded $37 billion since 2005.
There have been countless hours of hearings, investigations and Senate inquiries with thousands of submissions, the most *recent the Senate inquiry into ASIC over the Commonwealth Bank financial planning debacle.
Having covered collapsed and collapsing companies for most of the past 10 years, I have interviewed dozens (probably hundreds) of heartbroken investors and retirees who have lost most or all of their life savings — all *because of advice they received from their financial planner.
ASIC chairman Greg Medcraft says one in five Australians visit fin*ancial planners and that he is surprised the figure is so low. He should be amazed it remains so high.
At the heart of the problem is the chasm between what the public expects when they visit a financial planner and what they get.
A devastated elderly couple I interviewed, both retired doctors, had lost most of their life savings after being advised to use products, which have since failed, by their Brisbane *financial adviser.
“We’re both professionals. When you need health advice you see a doctor, when you need legal advice you see a lawyer, when we needed investment advice (we) went to a financial planner,” said the wife, who now suffers severe depression.
“We had no idea, it’s been devastating.” Or Christopher Cole, who sold his New Zealand home and immigrated to Australia. He sought advice from a Gold Coast-based financial planner on where to park the $600,000 proceeds from the sale of his house while he looked for a new home to buy. The adviser placed the whole amount in the MFS Prime Income Fund, which collapsed months later.
“I was going to buy a house with it but now I can’t afford to and I’m living in a caravan,’’ Mr Cole said. “I did exactly what you’re not supposed to do and invested it all in the one place, but the planner said it was a good idea.”
Lawyers and accountants require solid university degrees, which are difficult, comprehensive and take years to complete — in additional to further qualifications regularly required.
By contrast, the barriers to entry for financial planners are comparatively non-existent. The costs of ruining a reputation in *either the law or accounting sector are generally huge. But in financial planning, where obtaining a licence can be done with a week or two’s work, the costs of walking away if things go awry are minimal. Not that crooked planners regularly do.
This week in its submission ASIC again raised concerns over its lack of adequate powers to ban financial planners, which led to “phoenixing” problems, where *financial adviser companies were banned only to reappear under a new name.
I have been attacked by sections of the industry — in some cases with legal threats flying — for suggesting the nation’s financial planning education standards were sub-par. There was only one definitive way to prove it.
I Google financial planning education. I decide to give Integrity Education Group a miss — its website told me its Diploma of *Financial planning “provides anyone” seeking to become an adviser with the necessary compliance “to beomce (sic) ASIC registered as an Authoprised (sic) Represetnative (sic)”.
Instead, I approach the Monarch Institute.
I’m told of the price of the *diploma of financial planning — and the $175 SMSF offer.
I initially declined the SMSF component thinking I may be overreaching — I’m still not certain as to exactly how much work the planning course will take. Most of the websites I visit avoid the issue of completion time required, but most of those that do say the course should take *between six and 12 months. One site that does mention time states: “Course Duration: 12 months *(earlier completion is possible based on individual student capabilities)”.
It’s suggested by a Monarch *Institute representative, via email, I should take up the SMSF offer.
“I want to let you know that the inclusion of the SMSF to your *diploma of financial planning will only be an extra 5 units of competency that goes hand in hand with module 3 of superannuation, which is around 30-40 minutes of reading time,” the representative tells me.
The course reading materials come in four modules: foundations of financial planning; investments; superannuation & retire*-ment planning (including SMSF); and insurance. I’m provided with an online assessment portal. My assessment is to comprise four sets of multiple choice questions (one for each module, with the number of questions ranging from 18 to 46) and a series of short-answer questions for each of the four modules.
I’m told all assessment is “open book”, there are no time limits. I can sit the assessment wherever I like. I can have three attempts at each of the multiple choice sets (with a pass mark of 70 per cent). If I require more attempts I can contact the institute.
I cut no corners; I diligently read all the materials, fill out the multiple choice questions and the short answer questions.
During 34 hours of work I complete all the requirements of the course. This did not occur in one sitting, it was several months between signing up for the course and submitting all my assessment materials. As a working journalist I had other duties and the prospect of taking a week’s annual leave to conduct the course was too grim.
But regardless, I keep records of all my time working on the course. A few part days here and there and the odd full day takes me to nine days reading the material and answering questions. In total, and conservatively, 34 hours’ work. Four full days.
(A well known and very well qualified Sydney financier is known for stating he could knock off the course in a “lunch time”. While he’s very much on the right track I challenge him to this, though I am unaware of the length of his lunches.)
I score between 90 per cent and 100 per cent for the four series of multiple choice tests and 100 per cent (they are either pass or fail) for each of the four sets of short answer questions.
“Sensational! — You have shown an in-depth understanding of this material, and have achieved an excellent result,” I am told. To be fair, I hold a university degree in commerce and have been writing about financial matters for years, so I should score well. But regardless, anyone failing this *diploma should not receive a *licence to handle stationery, much less someone’s financial future.
For comparison, the course requires roughly the same amount of work as half, or less, of a first-year economics 101 subject, but without all the nasty assessments and studying. (It is also fair to note the issue here is not with Monarch itself. For what it was, the information was well presented. But the key issue is in the “for what it was”; the content required — or desperate lack thereof — to meet the RG146 compliance set by ASIC.) “Monarch supports higher education requirements to meet RG146 guidelines and supports the idea of mandating degree qualifications in preference to *diploma or advanced diploma courses,” a Monarch spokesman said.
My certificates (I’m now also qualified to provide SMSF advice after all) arrive in the mail. I have completed a full 22 “units of competency”, my certificates beam.
The only thing between me and setting up shop to the general public now is that under ASIC regulations, financial planners must operate as “authorised representatives” under an Australian *Financial Services Licence holder.
Re-enter Google.
Scores of providers show up.
I contact InterPrac. I’m told the process of becoming an authorised representative is relatively simple. I need to have completed my diploma of financial planning and have a police check run. The whole process should take less than two weeks, I’m told.
I am to receive 85 per cent of all income I make, with InterPrac receiving the rest, subject to InterPrac receiving a minimum fee of $375 a fortnight. (At the risk of running up more costs, potentially — and still having not been brave enough to hand in an expense claim for my diploma — I skip this final stage).
Under the arrangement the proportion of income kept by the financial planner gradually steps up to 95 per cent of all income made by the planner once they are earning $600,000 a year or more.
An InterPrac manager tells me I will be able to recommend about 90 per cent of the investment products in the nation. All products that InterPrac authorised representatives are allowed to sell must be given a tick of approval by a research house.
While this adds a gatekeeping layer, the data provided by many research houses has been criticised by sectors of the industry.
The chief executive of the *Association of Independently Owned Financial Professionals, Peter Johnston, said he believed the conflict of interest of product providers funding research was the “No 1” problem facing the *financial planning industry.
“Conflicted research is one of the key reasons we have $37.3bn in frozen, impaired or lost funds,” Mr Johnston says.
Regarding the RG146 requirements for the diploma of financial planning, Mr Johnston was concise: “We think they are pathetic”.
Mark Rantall, chief executive of the Financial Planning Association of Australia — which has long been pushing for better education in the sector — is equally dismissive of my new pieces of paper. Of the 34 hours spent *acquiring them?
“That long? You must have failed a few,” he jokes.
And as for ASIC’s mooted *financial planners’ “national exam”: I look forward to sitting it and letting you know how it all goes.
Do you know more?
klana@theaustralian.com.au