A guide to CPD under FASEA

This instrument details CPD obligations on licensed advisers and licensees that are covered by the Australian financial services licence (‘AFSL’) regime. For convenience we will refer to licensed advisers covered by an AFSL as ‘advisers’ in this article.

What are the CPD obligations of an adviser?

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Prepare a CPD plan

Each adviser must prepare a CPD plan for each CPD year which can be amended at any time. Advisers had a transition period to 31 March 2019 for documentation of this CPD plan. After this date, advisers need to prepare a plan before each CPD year or, where the person becomes an adviser after the start of the CPD year, no later than 3 months after they are registered as an adviser.

A CPD plan must broadly set out:

• which areas of competence, knowledge and skill that the adviser needs to develop and improve on; and
• what qualifying CPD activities the adviser will complete during the CPD year to achieve to develop those areas.

If the adviser is under a licensee then the adviser must provide the CPD plan to the licensee so the licensee can monitor its implementation.

Required CPD activities and hours

Advisers will need to complete 40 hours of qualifying CPD activities each year of which 70% (ie, 28 hours) will need to be approved by their relevant licensee. Thus, the remaining 30 per cent (ie, 12 hours) does not need to be approved by their licensee.

Advisers who work part-time may be entitled to a 10 per cent reduction to 36 CPD hours, subject to their relevant licensees’ prior written consent.

The relevant qualifying CPD activities must include a minimum of:

• 5 hours in technical competence;
• 5 hours in client care and practice;
• 5 hours in regulatory compliance and consumer protection; and
• 9 hours in professionalism and ethics.

If a CPD activity counts towards more than one CPD area, the activity counts towards the predominant category that it relates to provided there is no double counting of hours. 

There is a 4 hour cap for CPD activity that consists of professional or technical reading and a 30 hour cap for CPD activity that consists of formal education.

Given the reports from ASIC, the Productivity Commission and the Royal Commission, the minimum 5 hours of technical competence may not be sufficient, particularly for advisers that are involved in providing self managed superannuation fund (SMSF) services.

Maintain records

Under FASEA’s CPD policy, records of CPD activities, hours, etc, must be retained for at least 7 years. The adviser must make these records available to their licensee on request. The licensee of the adviser can maintain these records on their behalf.

Naturally, the licensee may do this by providing a centralised CPD tracking database that each adviser can access and track their CPD hours on.

What are the CPD obligations of a licensee?

Prepare a CPD policy

Licensees had a transition period to 31 March 2019 for documenting CPD polices and plans. After this date, a CPD policy must be adopted by a licensee no later than 3 months after becoming a licensee.

A CPD policy must broadly set out:

• the licensee’s CPD year;
• the licensee’s approach to its own CPD obligations and the CPD obligations of advisers under the licensee;
• how the licensee will:
• assess and approve CPD plans where an adviser has had a continuous career break of two years or more;
• monitor and implement CPD plans of advisers;
• assess and approve qualifying CPD activities and attribute hours to them;
• ensure that the advisers of the licensees meet the 70% (ie, 28 hours for full-time advisers) requirement of licensee-approved CPD activities;
• check compliance with its CPD policies;
• record and maintain evidence of qualifying CPD activities; and
• ensure records required are completed and maintained.

Each licensee must publish its most updated CPD policy on its website and ensure it is accessible by the advisers under its licence.

Maintain CPD records

As mentioned above, licensees can maintain CPD records on behalf of their advisers.

Make resources available

The legislative instrument also requires that the licensee make appropriate resources and opportunities available to their advisers to meet their CPD requirements.

Both licensees and advisers will need to know what constitutes a qualifying CPD activity so that advisers can incorporate those activities into their plan and licensees can approve those activities and make them available to their advisers.

What is a qualifying CPD activity?

A qualifying CPD activity is broadly an activity that:

• is in one of the following CPD areas:
• technical competence;
• client care and practice;
• regulatory compliance and consumer protection;
• professionalism and ethics; or
• general;
• has sufficient intellectual or practical content;
• primarily deals with matters related to financial product advice, financial advice services and financial advice business;
• is led or conducted by one or more persons who have appropriate and sufficient expertise and experience; and
• is designed to enhance the adviser’s knowledge and skills in areas that are relevant to the provision of financial product advice and financial advice services.

The above CPD requirements apply to all advisers. In particular, advisers with a limited licence are subject to the same CPD criteria as those with a full licence.

As discussed above, licensees are broadly required to:

• assess and approve certain qualifying CPD activities; and
• make appropriate resources and opportunities available to the licensee’s advisers.

Licensees can prospectively assess and approve the above training for their adviser network.

By Christian Pakpahan, lawyer and Daniel Butler, director, DBA Lawyers