Professional Year (PY) Program for Financial Advisers – how does it work?

From 1 January 2019, New Entrants to the financial planning industry are required to pass the exam after they have completed a FASEA approved degree, and before commencing Quarter 3 in their professional year.

In a recent FASEA Exam Prep MASTERCLASS the concept of the Professional Year came up and there was a lot of confusion about the Licensee’s obligations, the Supervisor’s legal responsibilities, and when an individual is eligible to entre the Professional Year (PY) Program.

It was apparent some Licensees do not understand what is required under the Professional Year Program.

What is the Professional Year?

It is a requirement of the Corporations Act 2001 that all new industry entrants are required to undertake before they are qualified as a Financial Adviser to provide personal financial advice to retail clients in respect of retail financial products.

A New Entrant is required to undertake a Professional Year of one year full-time equivalent comprising 1600 hours, of which at least 100 hours is to be structured training. This approach enables an individual to transition from a directly supervised approach to an indirect supervision approach as follows:

  • Quarter 1 – Client Observations and support to Supervisor/Experienced Adviser
  • Quarter 2 – Supervised Client Engagement and Advice Preparation
  • Quarter 3 & 4 – Indirect Supervision of Client Engagement and Advice Preparation.

Mid-way through the Professional Year and after passing the exam, the new entrant may use the terms Provisional Financial Adviser or Provisional Financial Planner.

How do Licensees register a New Entrant?

Licensees register the “New Entrant” using a form from the FASEA website.   FASEA then issues a New Entrant Registration Number (NERN).   FASEA advises “Licensees, Supervisors and New Entrants must meet specified obligations when they agree to participate in a Professional Year. These obligations are available on FASEA’s website www.fasea.gov.au/professional-year” 

It is uncertain as to whether FASEA assesses, approves or provides oversight of the New Entrant’s eligibility to commence the Professional Year.  The obligation seems to rest with the Licensee. For example, someone could commence the PY without having met the condition of completing a FASEA Approved degree/program if the Licensee was unsure or unaware of this entry requirement, or failed to appropriately evaluate the New Entrant’s existing qualifications.

It makes sense for the Licensee to be responsible to ensure this condition is met. The challenges is that many Small to Medium (SME) Licensees do not understand the requirements of the Professional Year.   Equally, many SME Licensees do not have the internal resources to put in place a formal, structured Professional Year Program that meet the requirements under the Corporations Act.

COVID-19 presents its own challenges with the PY.  FASEA’s view is that “the PY should evolve and adapt to the way (the) firm is currently doing business with clients, therefore their involvement in client meetings may now be required via telephone or video mediums accessible by its firm”.  

How are Licensees going to implement the Professional Year in a complaint manner and what impact will this have on the ability to “blood” the next Generation of Financial Advisers?