Thousands of financial advisers might quit the industry if the government pushes ahead with plans to make advisers hold degree-equivalent qualifications in three years, an industry group says.
The federal government hopes to lift standards in the embattled advice sector, through laws requiring planners hold a degree or equivalent qualification, pass an exam, and be subject to a code of ethics.
While consumer groups are backing the changes, two financial advice peak bodies have objected to the impact of the educational requirements on existing advisers.
Under draft legislation, new advisers entering the industry from 2017 will have to hold a degree, pass an exam, and spend a year developing their professional skills. Existing advisers will have a transitional period, but must complete bridging courses so they hold a bachelor degree or approved equivalent by 2019.
However, industry group submissions to the Treasury say existing advisers won't have enough time to get their qualifications up to standard, and this could prompt many older advisers to abandon their practices.
The Financial Planning Association of Australia's submission says it will be impossible for advisers working full time to complete the qualifications in the timeframe proposed by the government.
"The consequence of this measure will be a dramatic reduction in financial planner numbers, which will impact tens of thousands of clients being left without their financial planner to service them, hundreds of small businesses closing their doors, resulting in large numbers of support staff/employees out of work," it says.
The Association of Financial Advisers says older advisers will leave the industry if they are forced to hold a degree equivalent and pass an exam. For those in the later stages of their careers, the "time, cost and stress" of obtaining a qualification will drive many to consider early retirement, it says.
"The prospect of thousands of quality, experienced advisers exiting early over the next three years is an extremely concerning consequence of the proposed framework if it is implemented without changes being made," its submission says.
Assistant Treasurer Kelly O'Dwyer released draft legislation in early December and it is expected the bills will come before Parliament in the coming months.
Consumer groups are supporting the changes, which follow other moves to ban commissions, and the introduction of a public register of financial advisers.
Indeed, some groups representing retail investors want the government to take a harder line on how the new professional standards are phased in.
National Seniors said the push to lift standards needed "a greater sense of urgency" and argued that some aspiring advisers would seek to gain entry before 2017, so they would not have to complete the higher level of training as new advisers from that date.
Code of ethics
As well as lifting professional standards, the changes will force advisers to be subject to a code of ethics from 2019.
The design of this code of ethics is also being debated, with industry groups previously raising concerns that advisers will not have to be members of an independent professional body.
This is contrast to the 2014 recommendation from the powerful parliamentary joint committee on corporations and financial services that all advisers be required to be a member of a professional body.
National Seniors and consumer group Choice also raised concerns about the government's plan to exclude from the professional standards requirements planners who provide advice exclusively on time-sharing schemes.