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Podcast Transcript

Episode 73, Season 1

Update from FASEA CEO Stephen Glenfield


Fraser Jack: 00:00 Did you say that you’re working with advisors that didn’t quite get good [crosstalk 00:00:04]

Stephen Glenfield: 00:03 So advisors that didn’t get through in their results, will get a summary of the areas they struggled in, so if they’re looking to actually do something additional to get them through the next time, I’ll know where to go and work on so that when they come back, they should be more rounded and[inaudible 00:00:19]

Fraser Jack: 00:18 Welcome to the Goals Based Advice Podcast, where our conversations with pioneers of the new world of financial advice. Your host Fraser Jack, wants to thank you so much for tuning in today.

Very special episode this one, we’ve managed to be joined by a special guest in the foyer of a hotel in which he’s just walked off stage. Welcome to the show, Stephen.

Stephen Glenfield: 00:41 Thank you Fraser.

Fraser Jack: 00:42 Now Stephen do you want to give us a quick overview of what you’re doing at the moment?

Stephen Glenfield: 00:46 Well I’m Stephen Glenfield and I’m the CEO of the financial advisors Standards and Ethics Authority, which is the regulator charged with putting in place standards to lift the level of financial advisor’s education, ethical behavior and their training for the future.

Fraser Jack: 01:05 Fantastic, a huge job which we’ll get to in just a minute. Tell us about your journey, how did you manage to become appointed as the CEO?

Stephen Glenfield: 01:14 Well I’ve spent the last 20 years working for APRA, the banking superannuation insurance regulator. So I was managing the regional offices of APRA, supervising everything from banking, to insurance, health insurance, non bank financials and particularly superannuation.

When FASEA was brought into play, I was approached about whether I would have an interest in the role, and then looking at it, I was particularly taken by its focus on the advisors themselves because when I look at what I’ve seen over the last 20 years and any problems that arise, is generally two elements to it.

One is the structural element of the organization in the first place. Which is effectively what APER and ASIC are looking at. But there is also the personal element that someone actually has to do the behavior. And I thought FASEA was a wonderful opportunity to come in at that base level of educating the advisors over what the right behavior is, and ensuring they were appropriately trained and qualified. That they would know the right behavior and if you like, cut off those problems at the knees through bringing the advice from unit through to a profession that can be trusted.

Fraser Jack: 02:28 Right, now you’ve come into the role almost 12 months ago- just over 12 months ago actually now. That must’ve been a heck of a rollercoaster.

Stephen Glenfield: 02:35 Its been very interesting. I knew the time frame were tight, but the magnitude of the amount of work that’s had to be done in a short period of time has been staggering. I’ve been blessed with a strong staff that have helped. I’m pretty proud of where we’ve got to in terms of putting into play all those education standards and all the requirements around the corps law for training, for PY, for education and we’ve even got the exams up and running now so its been an enormous output.[crosstalk 00:03:13]

Fraser Jack: 03:14 It seems like an almost impossible task when you would’ve started on it, I imagine there was so much to do.

Stephen Glenfield: 03:20 It was a lot to take in on arrival, but I guess I’m fortunate my background in supervision overtime has sort of given me the right grounding and actually looking at something and breaking it down into its compartments and what needed to be done.

Plus when you do have the strength of legislative requirement behind you, you can actually get things done, they don’t get tied up but I wouldn’t underestimate the size of the job we’ve done.

Fraser Jack: 03:44 Yeah, that is a huge effort. Now you’ve just go off stage.

Stephen Glenfield: 03:48 Yep.

Fraser Jack: 03:48 You’ve just performed a presentation up there. We touched on a number of the different topics, do you want to give us an overview of the presentation?

Stephen Glenfield: 03:55 Yeah so, it was basically a picture of where we are on that journey of putting the standards into play and lifting the advisor profession. So it was a talk on where the education process is at. It was a talk on exams and how the first exam performed and the upcoming exams and a bit of the lessons for revisers who want to sign up.

I particularly spent some time on the code of ethics. Because the code of ethics is probably the one big centerpiece of the FASEA work that’s fairly unique in that its a legislative code rather than a voluntary code, so it becomes a piece of law. So important to spend time on that.

Fraser Jack: 04:35 Now you also, sort of touched on earlier and in the presentation a little bit about where to go at the first point of call, where advisors go to, and obviously the website is the first point. You said you had a tool on there that’s been really popular.

Stephen Glenfield: 04:49 Yeah we’ve got an education navigation tool, cause a lot of the particularly existing advisors, are unsure what they need to do. They can go onto the site itself and bring up the navigation tool and it asks them to put in their qualifications that they’ve done over time and it will give them the advice; this is the study you need to do. They can then click through to see which universities and higher education providers are offering that study as a way of getting some certainty of what they need to do. Its had over four thousand people use it so far, its proving very popular.

Fraser Jack: 05:20 We’ve mentioned the conversation of the changes that have been announced but not yet through the legislation.

Stephen Glenfield: 05:30 Under the original legislation existing advisors had to pass the exam by 1 January 2021 and they had to have completed their education at bachelor level or higher by 1 January 2024. The government announced at the end of August, the intention to extend those timeframes for one year for the exam and two years for the study.

But the point I was making at the conference was that’s not set in stone yet, that’s an intention. That requires a change to legislation and it needs to pass both houses of parliament. So whilst its being portrayed around a bit about it being a done deal, it does still have some way to progress. I was encouraging advisors not to just pull back because of that. FASEA certainly works to the existing timeframe until it changes.

Fraser Jack: 06:15 Okay, until its passed and becomes law, essentially its business as usual with the existing timeframes.

Stephen Glenfield: 06:22 Correct.

Fraser Jack: 06:22 And so everybody should be continuing to push hard to get those time frames.

Now you mentioned... I really liked the analogy of the lighthouse on the hill, with regard to the end of this when we look back, you know, do you want to talk about that?

Stephen Glenfield: 06:36 Yeah I do and its probably the piece that drives my work everyday, I call it the light on the hill 2024, might be 2026, but it is the light on the hill and its worth looking at the long term outcome of this. So its easy to get caught up in what age the legislative bit is, but if I think at the end if you’re a consumer who goes to see an advisor at the end of the transition period, you’ll be in a position then of being confident that that advisor has got a minimum level of education they’ve done if they’re a new advisor, they’ve done a professional year under the guidance of a very experienced advisor, they’re committed to ongoing education through their CPD to keep their standards up. They’ve passed an exam that shows they understand the practical application of the law that they work under, they’re not just people who understand what the law says, they can practically apply it. And they’re operating under an umbrella code of ethics which guides them to act in the best interest of the consumer at all times.

That compared to today, where a lot of consumers would say ‘I don’t know who my advisor is or what their background is or what they stand for.’ This will take them to position that it looks like a profession, the minimum set of skills that you would see in any other profession, where that’s a medical profession or lawyers or accountants, advisors will be coming into that same space. And to me, for a consumer in the long term, that’s got to be a really good benefit.

Fraser Jack: 08:06 So you really see at the end of this, the recognition that this is a profession. Not just from within the own profession because I’m sure we all do at the moment, believe its a profession, but from the consumer or the outsider looking in.

Stephen Glenfield: 08:19 I do. You look at some of the studies that have been done in recent times about how many people use advice. To me you look at the way, say superannuation as an example, people coming out of super in the next 10 to 15 years have been in it from the beginning are going to come out with very sizable balances. They need good advice and trusted advice about how to help that money see them through their retirement. Part of it is the FASEA program will let them know that at least the advisors they speak to will have a minimum standard that is consistent across the board and is well worth doing as they try to work out their future. So really important.

Fraser Jack: 09:01 They’re one the major pieces to this puzzle is the exam. Obviously there’s been a lot of work go into that and theres been a lot of advisors gone through that already. Lets cover off from the exam, even from the first intake.

Stephen Glenfield: 09:15 So the first exam was run in June, 579 advisors were good and brave to do it. The exam tests practical knowledge of three areas that you wold expect a competent advisor to know. So its the practical application of the law, practical application of ethics to a scenario and practical application of knowing their client.

There was a 90% pass rate on the first one, which I thought was thrilling for those who did it because it indicated that they were in fact competent advisors. In doing the exam, what we’re seeking to set is there’s no rules around how many pass or fail, its just if you’re competent, you should get through. And that again should add confidence to the consumers longterm, that those who’ve sat the exam are competent.

We’re coming now, we’ve got September and December exams coming up and there’s about 18 hundred signed up for each one of those. So advisors are embracing, well I don’t know if thyre embracing but they’re accepting the need to do the exam and they’re signing up. And we’ll announce states for February and April shortly, which will include in February for remote advisors the ability to do it via remote propetering from their own place of work.

Fraser Jack: 10:28 The competence that came out of that first competence level, 90% competent, which means 10% not yet competent, but that’s the point right? To come up to that level.

Stephen Glenfield: 10:40 Correct.

Fraser Jack: 10:41 Was there, I guess, in the results of that, is it close? Are those not yet competent close to being competent?

Stephen Glenfield: 10:49 It varied. There were some who were quite close and they’ve had advice on the areas they need to study on. There were a few who missed the mark by a fair way but I mean I look at part of that is, for a lot of people maybe first time they’ve done an exam for a long time, the nervousness of doing that can have an impact.

The good thing about the process is that its not a one and done, if you fail you’ve finished. You actually get the opportunity to go away and do extra study and come back and sit it again. So if you’ve had, one for a better word, a bad day, you do get a second shot.

Fraser Jack: 11:24 I think I was discussing previously with somebody who had the attitude go and just give it a go, and then if you fail that you know what to do next and it becomes a less daunting task. But did you say that you’re working with advisors that didn’t quite get good competency?

Stephen Glenfield: 11:37 So advisors who didn’t through in their results will get a summary of the areas they struggled in. So that if they’re looking to actually do something additional to get them through the next time, they’ll know where to go and work on so that when they come back they should be more rounded in what they’re trying to do.

Fraser Jack: 11:52 Yeah okay. So you mentioned that the idea that not everybody is gonna... that there is no pass mark, for example what did I say? That there was no pass mark requirement from your end, we just need to get everybody to the level that they need to be at or to prove that they are at that level. Do you want to comment on that?

Stephen Glenfield: 12:08 Yeah so, there’s been commentary about whether we have a number that we would like to fail or do we put a bell curve in place for each exam. Its never been about that, the change to the legislation are there to lift a standard to meet, and in the case of the exam, this is what a competent advisor should be able to do. So if everybody gets that standard, that’s fantastic because its actually good for the consumers because they’ve all either demonstrated they were already there or if they weren’t there, they’ve worked to get there. So we don’t have a view on how many should or shouldn’t pass but what we do have a firm view on is you must be competent to pass and I think that’s appropriate.

Fraser Jack: 12:50 You also mentioned practical application a few times in this conversation.

Stephen Glenfield: 12:54 So the exam I not like going to university and studying a course. The university courses are sort of the base level knowledge and that’s your technical knowledge. The exam is designed to be practical application. So if you’re faced with a scenario, how would you behave ethically in that scenario or if a client comes and tells you their history about something, what’s your knowledge of that client and how they would behave and act in terms of your advice. So its not a technical recall, its actually what you expect of advisors doing day to day.

Fraser Jack: 13:26 Yeah okay, very good. And so you’ve mentioned that September is now closed, September intake but applications are still open for December.

Stephen Glenfield: 13:35 Yes.

Fraser Jack: 13:38 At the moment, like we said everyone sort of has to get it done sooner rather than later. So that’s the exam, there’s been a lot of conversation upstairs around the code and the code monitoring body and how all that’s going to work. Obviously there’s some fairly tight deadlines around that at the moment.

Stephen Glenfield: 13:56 So the code comes into play at 1 January 2020. One of the planks of the code is that there will be code monitoring bodies in place to monitor advisor’s compliance with the code. The approval rests with ASIC but my understanding is that their looking at having those approvals by the end of October because advisors need to start signing up in November to a code monitoring body before the end of the year.

Fraser Jack: 14:23 Yeah possibly a two week turnaround there.

Now FASEA is obviously not responsible for the ongoing policing, if you like, of the code. Is that something that maybe should’ve happened or could’ve happened?

Stephen Glenfield: 14:37 I don’t know, if you look at regulators like APRA and ASIC they have the role of being standard setter plus supervisor plus enforcer. But in setting up and putting through these changes in legislation, parliament made the decision that FASEA would be purely the standard setter which does enable us to be a fairly small organization. We’re not a big big regulator, that is purely there to put the standards in play. You then have the decision that code monitoring bodies would be the active bodies in monitoring.

Do I have a view on which way it could’ve gone? Not really. Its just the important thing is that its monitored. It doesn’t really matter who does it, but as long as it actually happens. Because there’s little point of having a law come into play if no one’s going to look at it. So I take some comfort from the fact the code monitoring bodies will be there.

Fraser Jack: 15:27 And just on this idea that the FASEA is there to set the standard, does that mean the end of 24 or 26 whatever that might be, that FASEA stops to exist?

Stephen Glenfield: 15:37 No not really. There are a number of roles that FASEA has ongoing. One of which is the standards are subject to renewal. So because you write a standard today doesn’t mean its going to be the perfect standard for three years, five years, ten years time. So there’s a requirement under the act that FASEA regularly reviews the standards. So I think it remains as a standard setting, a fairly small standard sting body going forward.

Its also still required to run the exam into the future. For any one doing their professional year has to do the exam towards the end of that professional year. So there will be a role in that. And foreign qualifications will require approval as well. It won’t be as active as it is today, but it will have an ongoing role.

Fraser Jack: 16:21 Yep. So just before we were talking about the code, there’s been a fair bit of conversation today around the code, around how it sets out. Do you want to run through sort of what you were talking about before, around the main purpose of the code?

Stephen Glenfield: 16:35 Yeah so the code is there as a guide to ethical behavior for advisors when they’re dealing with their client. Its there to drive home the view that to behave ethically to a client is to put the clients interest ahead of yours. And the code has a series of values, five values that dictate the way that we expect people to work and the way they would expect to interact with their clients. And its there to provide an awareness to advisors that they cannot put their interest, as I said, over the interest of the client. It seems to me to be common sense but history shows that you need to actually define what ethics looks like, and this code does that.

Fraser Jack: 17:24 And there’s a fair bit of point about point three I think, section three, standard three. Do you want to give us a bit of an overview of standard three and what the conversation [crosstalk 00:17:36].

Stephen Glenfield: 17:36 Standard three says that if the advisor has a conflict, they must not act. So what its driving at is if in giving your advice to a client, you’re conflicted in giving that advice, you shouldn’t be giving that advice.

The area that’s driving a lot of conversation is how does remuneration fit into that and a view that if I’m being remunerated, I’m conflicted and therefore the standard won’t let me work and therefore can’t operate. We don’t view it in that fashion. Its around ‘is there, I tried to say today, is there anything in your remuneration that is inducing you to act in the manner that is not in the best interest of the client or consistent with the code’. If that’s the case then you are conflicted and you can’t act. If that remuneration is not driving you to act in a manner that’s inconsistent with that, then you don’t have a conflict in that piece of advice with the client.

Fraser Jack: 18:36 So if I’m receiving a life insurance commission that’s the same from company to company, you don’t see that as a conflict?

Stephen Glenfield: 18:43 Again you need to look at that piece of advice that I’m giving, in giving this insurance advice and you look at the various sections of the code which include ‘is the fee reasonable and fair? Does the client understand the fee? Does the client understand the advice that’s been given and the risks that’s been given? Is the advice you’re giving them actually in their best interests?’ You need all of that to fall into play to be able to advise. But if there’s something in that commission that’s driving you to say I’m only selling that product there and I’ve got no interest in any other product even though I know some of them are better than the one I’m selling, then you are conflicted and you shouldn’t act.

Fraser Jack: 19:21 Okay fantastic, so that’s a bit of clarification. And you’re also producing some more documentation coming out.

Stephen Glenfield: 19:26 So we’ll have a code guidance document coming out which will give a series of case studies just to help people understand various scenarios over how the code would actually apply.

Fraser Jack: 19:35 And when do they come out?

Stephen Glenfield: 19:36 Expecting it to come out within the next four weeks.

Fraser Jack: 19:40 Fantastic, okay. And what else have we been working on? You’ve got the professional year.

Stephen Glenfield: 19:47 So the CPD and the professional year are both important. The professional year I think is really important in bringing this up to become a profession. Because you look at most professions, I’m a long, long, long time ago chartered accountant and had to go through my professional year. Part of becoming a profession is to be educated by and work side by side with experienced people to learn how to properly advise. And I think it’s a really important part of what’s being brought into play.

And the CPD is really important. To date there is no consistency on what continuing professional development and advisor has to do. So some will be really diligent and some may not be as diligent.

Where as what we brought in is a standard which has a minimum amount that they have to do and the areas they have to have CPD in. And importantly it puts the [inaudible 00:20:38] on the licencee to confirm that CPD that the advisor is doing is appropriate for their individual needs. Which again I think is a step forward in professionalizing what they’re doing and keeping them abreast of changes in the advice industry as it goes forward.

Fraser Jack: 20:52 Yeah and one of the things I also just want to touch on before we let you go, is this idea that the advisor themselves definitely have to be responsible... it’s not a licencee thing or?

Stephen Glenfield: 21:06 If you look at the FASEA legislation is part of the corporation’s act, drafted around relevant providers as they’re called, or you what you better know them as advisors. So its all target to the individual advisor, our legislation is not for corporations or broader groups. Its legislation for the advisor and its seeking to make the advisor stand up and take responsibility for their own conduct.

Fraser Jack: 21:29 So the middle of a situation where I imagine, where advisors, if they’re working with a group or working, might actually turn around and say ‘no I don’t believe that’s the right thing to do.’ They would be able to push back?

Stephen Glenfield: 21:40 Yeah and its part of the code, I think standard 12 encourages that part of being a profession is having the courage to call each other out. I mean, you look at a lot of the cases that went through the royal commission, some people knew what was going on but for whatever reason didn’t have the courage to call it out. Part of growing as a profession and being ethical is being willing to stand up and do that.

Fraser Jack: 22:03 Yep fantastic, and we might leave it there. Thank you so much for coming on the show Stephen, we really appreciate your time. I know you’ve got a lot to do so I appreciate you coming in and just sharing that information. A lot of people had a lot of questions about this so I think this will be a very helpful episode, I appreciate it.

Stephen Glenfield: 22:17 Great thank you Fra-

Fraser Jack: 22:18 If you haven’t already, I would love you to subscribe to the podcast on your podcast platform of choice.

And to continue the conversation, head over to our social media channels.

We’ll catch you next time.



Disclaimer: This document is a transcription obtained through a third party. There is no claim to accuracy on the content provided in this document, and divergence from the audio file are to be expected. As a transcription, this is not a legal document in itself, and should not be considered binding to advice intelligence, but merely a convenience for reference.