Vital training and development for financial advisers is being killed off under the FoFA regime and the legislation must be amended, assert AFA in a submission to the Treasury.
While noting its strong support of the exposure draft on the FoFA amendments, the Association of Financial Advisers Limited (AFA) has addressed why some specific amendments are particularly important.
Training on conducting a financial services business should be as relevant to training on the provision of financial advice, however the existing exemption under regulation 7.7A.14 is impractical when it comes to the provision of support to licensees for education and training, AFA said in its submission.
COO Phil Anderson told Wealth Professional
that while he understands what the objective of this part of the legislation is, it has inadvertently hurt advisers’ training and development possibilities.
“At the core of this was the risk that somehow product providers could influence advisers to preference their products, but there have been things that are legitimate practices in the industry that have been caught out by this,” he said. “What we’re trying to do is find a sensible balance point where you can have product providers play a role with licensees and give them an opportunity to talk to the advisers, but not in a way that will influence their products.”
Prior to the introduction of FoFA, many licensees engaged in partnership programs, whereby entities including product providers and other suppliers would provide sponsorship funding that was then used to support the provision of professional development activity.
In return, partners would then have the opportunity to provide speakers, marketing material, or exhibition stands at events.
However under the FoFA regime, these partnership payments are seen as potentially conflicted, which has resulted in the programs being severely cut back, and a decline in the use of venues and related training industry services.
Anderson says the majority of the practice is not conflicted however, and the partnership payments are flat dollar payments and not volume based.
“We want to find a mechanism whereby licensees can collect partner program money that is used for the right purposes,” he said.
Although the FoFA regime gives licensees the ability to argue that their partner payments are not conflicted, many are hesitant to risk engaging in a program because the regulations are not clear, and would require high level legal sign-off by both parties.
“Some people still do have partnership programs but it’s really unclear how it could land,” said Anderson. “If we can have an explicit resolution of, ‘this is how you can run a partner program’, it would be so much easier. Our concern is that these partnerships exist so advisers get the level of education and training they need.”