On 24 June 2013 ASIC released a consultation paper proposing changes to the training standards for financial product advisers. Consultation Paper 212 Licensing: Training of financial product advisers – Updates to RG 146 (CP 212) outlines proposed changes to the training standards that are set out in Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146).
CP 212 retains the current training requirements in RG 146 as “base level” standards (Regime A) and introduces two further regimes of training to come out in 1 January 2015 and 1 January 2019 (Regimes B and C). Comments are due on the consultation paper on 30 September 2013 and the regulatory guide is scheduled to be released in April 2014.
This note provides a summary of the proposals and any changes that are specific to general insurance advisers.
Training requirements differ depending on the type of financial product or advice. Financial products are classified as Tier 1 or Tier 2 products. Tier 2 products are generally simpler and better understood than Tier 1 products and are therefore subject to lighter training standards. General insurance is a Tier 2 product. There are also two types of advice a financial adviser can give, general advice and personal advice. The training standards are also different for each type of advice.
Here is a table of the current training standards framework.
Click here to view table.
Overview of proposals
Regime A will continue to apply to existing financial advisers who do not want to change the type of advice they will give. Regimes B and C apply to new financial advisers who will start providing advice on or after the implementation of the relevant regime. Regimes B and C also apply when existing financial advisers decide to change the type or level of advice they are providing. Those financial advisers will need to train for the new type or level of advice, under the new regime implemented at the time of their change.
Here is a table summarising how the proposals will apply to an adviser who has trained under one regime and decides to change their advice activities in a subsequent regime.
Click here to view table.
Proposal that will affect general insurance advisers
CP 212 proposes to increase the educational level requirements for persons giving advice on Tier 2 products. As general insurance is generally classified as a Tier 2 financial product, general insurance advisers will be affected. The requirement for a general insurance adviser, currently an AQF Level 3 Certificate III, will be increased as follows:
- for Regime B (from 1 January 2015), to AQF Level 4 Certificate IV; and
- for Regime C (from 1 January 2019), to AQF Level 5 Diploma.
The increase in educational level requirements will apply to both general and personal advice.
Personal sickness and accident insurance is currently classified as a Tier 1 product in RG 146. Industry groups have suggested that personal sickness and accident insurance would be more appropriately classified as a Tier 2 product as it is not more complex, nor does it have greater potential to impact significantly on a client’s financial situation than other Tier 2 general insurance products. ASIC is seeking feedback on whether personal sickness and accident insurance should be classified as a Tier 1 or Tier 2 product.
Furthermore, consumer credit insurance is currently classified as a Tier 2 product because it is a relatively straightforward financial product. However, consumer credit insurance can consist of both life and general insurance components. Life insurance products are generally categorised as Tier 1 products. Therefore, ASIC is asking for feedback on whether to classify consumer credit insurance as a Tier 1 or Tier 2 product.
ASIC has not proposed any substantive changes to the specialist knowledge requirements for general insurance. However, ASIC is asking for feedback on the need for further changes, including new specialist knowledge requirements, to CP 212.