FASEA EXAM INSIGHTS #1 June Exam Wrap-up

This is the first of a 6-part series of insights into the FASEA adviser exam.

Some 600 advisers sat the first round of FASEA exams this month. Even though the specific content of future exams will continue to change across and within the next 8 sittings or so, there are some valuable takeaways that can be applied to every exam.

Firstly it is important to understand the significance of the exam curriculum published by FASEA.

  • Financial advice regulatory and legal obligations
  • Applied ethical and professional reasoning and communication
  • Financial Advice Construction

I interpret this as:

  • Know the rules that existed pre-FASEA (i.e. Ch7 Corporations Act, Privacy Act, AML / CTF, TASA)
  • Know the new Financial Planners and Advisers Code of Ethics 2019 plus Explanatory Statement) really well; and be able to recognise breaches and potential breaches in any personal advice situation
  • Know how to construct personal advice lawfully and ethically that is genuinely in the best interests of the client by any definition

In your exam preparation, the first step is probably the most challenging.  That is, knowing the pre-FASEA rules.

A large part of it is contained in ‘Vol 4 & Vol 5’ of the Corporations Act (ref. FASEA reading list).  The reading list reference looks innocent enough but there is a lot of it.

Even though every adviser was expected to have known all of this for the past few years, my experience to date is that most don’t.  And then there’s the other legislation mentioned above.

Many advisers have missed the fact that the Tax Agents Services Act 2009 also contains its own Code of Professional Conduct which binds every adviser by way of membership of the TPB. There is a lot of examinable information relating to tax financial advisers on the TPB site.

Expect a question on privacy because it is paramount for clients. Know the requirements for inter-office transmission of personal information, as well as local and overseas outsourced services (e.g. para planning, investment and audit services) plus third party referral situations.

Because financial advisers are ideally placed to detect suspicious individuals, organisations, beneficiaries and financial transactions, focus on suspicious matters that must be reported to Austrac. It is not only about money laundering and terrorism financing issues. It also includes tax evasion, superannuation and Centrelink fraud.

The new Financial Planners and Advisers Code of Ethics 2019 is FASEA’s pride and joy. It will feature prominently in every exam so know both the code and the Explanatory Statement inside out.  The latter contains some helpful examples in the Appendix.

It is also vital to understand where and how the Code of Ethics extends adviser obligations in the Corporations Act.  And don’t forget to read FPS003 Professional Year Policy and FPS004 CPD Policy.  They too will feature in an exam..

When looking for ‘applied ethics’ examples, focus on the long and unflattering history of the financial advice industry.  Consider the structure of the industry, where advisers and planners are employed, and the various pressures that advisers work under in different employment environments.

Focus on where the law has changed in response to society pressure and government policy e.g. conflicted & banned remuneration, fee for service and product switching.  More to come later!

Finally, some words of warning for financial advisers who specialise in one area only, e.g. risk insurance advisers.  This is an exam for all advisers.

This means exam scenarios, from which several questions will subsequently flow, are likely to cover a multitude of situations.  Whilst it is doubtful that the exams will be over-technical, it will help to understand the basics and terminologies of all relevant advice disciplines.

# FASEA EXAM INSIGHTS #2   “Understanding how the adviser exam is generated” coming soon!