FASEA exam lifts adviser standards | Money Management (2022)

FASEA exam lifts adviser standards | Money Management (1)

As the financial advice industry adjusts to the Australian Securities and Investments Commission’s (ASIC) takeover of education responsibilities for the profession, advisers agree sitting the exam is a worthwhile experience that helps increase knowledge.

After conjecture around the proposed requirement for all ASIC-registered financial advisers to hold a degree qualification, most are now comfortable with the compromise reached to allow senior practitioners without a degree to continue providing financial advice to clients as long as they sit a tertiary-level ethics exam.

Since 2019, the Financial Adviser Standards and Ethics Authority (FASEA) had administered a Federal Government-mandated set of standards to which financial advisers were required to adhere to.

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Until 1 January this year, FASEA was also the body that conducted the exams ASIC-registered advisers were required to sit to maintain their registration with the regulator. Federal Treasury took over this responsibility at the start of 2022. Simultaneously, ASIC assumed responsibility for adviser education, in conjunction with the Australian Council of Educational Research (ACER), which has been responsible for developing and administering the 15 exams that have been held so far. ACER will continue to run the exams.

The examination requires advisers to apply their knowledge to between 70 and 80 case studies over three-and-a-half hours, covering legislation including the Corporations Act 2001, the Anti-Money Laundering andCounter-Terrorism Financing Act 2006, the Privacy Act 1988, the Tax Agent Services Regulations 2009 and the Financial Planners and Advisers Code of Ethics 2019. The open book, multiple choice, pass/fail test examines practitioner knowledge of financial advice regulations and legal requirements, financial advice constructions and ethics.

MetLife’s head of advice strategy, Jeff Scott, said: “ASIC has produced a number of excellent resources to assist financial advisers with their exam preparation, including recommended reading lists, sample examination questions, and examination guidelines.

“There is an extension to October 2021 if an adviser has sat the exam at least twice and failed. Advisers who have not sat the examination, or have only sat the examination once and failed, are now unable to provide personal financial planning advice to clients until they complete the relevant ASIC, formerly FASEA, education requirements,” said Scott.

According to ASIC’s figures, 17,950 of 19,770 advisers have passed the adviser exams held to date, which is roughly nine out of ten candidates. More than 15,500 of those who have sat the exam are recorded as active financial advisers on ASIC’s Financial Adviser Register, representing 82% of active advisers on the register. To date, 3,197 unsuccessful candidates have re-sat the exam, 66% of whom have passed.

Some areas where ASIC has identified exam candidates underperforming include applying Chapter 7 of the Corporations Act 2001 to components of the Statement of Advice and Financial Services Guide and identifying the consequences of not acting in best interests of clients. Demonstrating knowledge and understanding of the code of ethics was also an area for improvement.


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The introduction of the Financial Planners and Advisers Code of Ethics back in 2019 represented a radical shift in the way financial advisers were regulated.

“While most advisers already acted in their clients’ best interest, codifying the principles by which all financial advisers must operate meant locking certain thinking into everything we do.

“For example, Standard 8 on record keeping gave our practice the opportunity to re-examine our entire engagement and advice process and how we document client conversations. As a result, we fine-tuned some of our existing processes, which led to better audit trails. Interestingly, it also clarified how we articulate the value of advice to clients,” said Peter Foley, director of financial planning firm Third View.

Foley said sitting the exam was useful, although Third View was already following many of the standards outlined in FASEA’s code of ethics, such as the client care and ethical behaviour requirements. “They have always been the bedrock of the decisions we make and the way we advise our clients.”

Pete Pennicott, director of financial advice firm Pekada had a different view on the standards but felt they had served a secondary purpose at his firm.

“The exam’s scope was vast but much of it did not apply to our advice offering, although it served a secondary purpose in terms of building awareness of the broader financial services industry. It also gave us a framework in terms of identifying issues and mapping the path forward. This helps us articulate to clients why certain parts of the advice process exist, especially when they seem tedious.”

Sarah King, head of advice at online investment platform Stockspot, said sitting the exam was an opportunity to refresh her knowledge of legislation such as the Corporations Act 2001.

“The FASEA code of ethics also provides a good framework for ethical decision making, which I already embody as an adviser. It was a useful opportunity to understand where we need to get to, to be considered a true profession with properly-defined standards, to which all advisers are held accountable.”

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Before the FASEA exam was introduced, formal study was years in the past for many advisers. So, the biggest challenge in sitting the FASEA exam for many within the profession has been knowing how to study for and successfully sit the examination.

The Association of Financial Advisers’ national practitioner chair, John Cachia, a financial adviser with 20 years’ experience, said it is important to understand that when it was introduced, the FASEA exam was totally unfamiliar to advisers.

“It was challenging getting them to understand ethics and professionalism and the standards the public and Federal Government expect financial advisers to maintain. The exam was the game changer and helped ingrain professional practices across the industry.”

Scott said MetLife realised when the exam was introduced, it would be a daunting experience if a financial adviser was unfamiliar with university-style exam situations, especially if they hadn’t sat any exams since high school.

“So, we developed exam study skills materials for our advisers, distributed advice about what the exam environment was like, helped them to understand how to pace themselves in the exam and gave them insights into how to prepare. In the past two years, 1,000 advisers have used our tools and successfully passed the exam,” said Scott.

Paul Moran, partner with financial advice firm Moran Partners and founder of financial advice fintech iFactFind, was among the first cohort of advisers who sat the FASEA exam in 2020 and stressed how important it was to be exam-fit to pass.

“I’ve done a lot of education in my life and I’m very comfortable with digital and exam technique, so I was confident sitting the exam. As a licensee, I also have an in-depth understanding of the law. I had already embedded many of the practices tested by the exam such as ethics in the business.”

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Moran said it was frustrating, however, not to receive any feedback on the exam.

“The idea of implementing learnings from the exam is impossible when there’s no feedback.”

He recognised giving feedback was difficult at a practical level because everyone sat the same exam and providing comments on individual exam papers would give the game away for future students.


A requirement for ASIC-registered advisers to hold a degree qualification was a sticking point through the decade-long negotiation process to codify adviser education. The compromise is a Government-sanctioned ‘experience pathway’, which is an opportunity for advisers without a degree, but with 10-plus years’ experience, to continue providing advice as long as they sit the tertiary-level ethics exam.

Foley said this was a sensible option. “I’m not degree qualified, but I have provided advice for 17 years. For a government or regulator to insist on my return to study is a pure farce. I passed the FASEA exam, received the CFP designation in 2008 and have maintained extensive CPD requirements throughout my career. Any requirement for experienced advisers to study to a degree level is not necessary.

“But I acknowledge new entrants to the industry should be required to obtain a degree and existing entrants who have only minimal qualifications should be required to do further study. This will lift the standard of knowledge and technical competence within the profession.”

Pennicott agreed, he said: “An experience pathway is essential; you can’t completely dismiss the knowledge gained over years of being a practising financial planner. The majority of my expertise has come from practising financial planning and not necessarily from my university degrees. A balanced approach is needed, as we are still on the journey to lift the status of the financial planning profession. Therefore, a pathway that brings together tertiary qualifications and industry experience makes sense”.

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Nevertheless, he acknowledged not all experience is equal. “Credit for experience could be assessed individually. The idea would be to have an appropriate body or university assess an individual’s experience and apply credits for tertiary units. This serves to recognise the individual’s specific experience and create knowledge and tertiary pathways to fill in the gaps.”

The first exam sitting under ASIC’s administration took place earlier this month. It’s likely adviser exams will evolve through time as the industry continues to professionalise.

Alexandra Cain is a freelance journalist for Money Management.


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