The Financial Adviser Standards and Ethics Authority released its draft guidance on the five key areas existing financial advisers will be tested on under the new education requirements.
FASEA is proposing tthe Financial Adviser Examination assess the practical application of advisers' knowledge around the Corporations Act, with an emphasis on Chapter 7 - financial services and markets (30%), and the FASEA code of ethics (15%).
It will also test advisers' competency in elements of behavioural finance such as client and consumer behaviour, engagement and decision-making (10%), as well as applied ethical and professional reasoning and communication (25%).
The final component will look at financial advice construction and the suitability of advice aligned to different consumer groups (20%).
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In terms of structure, FASEA is suggesting a mix of multiple choice and short answer questions. It would include a total of 75 questions, five of which would require written responses.
If an adviser fails their first attempt at the exam, they will be able to re-sit the test twice thereafter, with different questions to be answered each time. Completion of the exam would take between three and four hours.
In regards to marking, FASEA proposes a scaled passing score of 65% with the guidance stating: "The scaled passing score is FASEA's view of the minimum level of applied knowledge required for independent practice as a financial adviser. Raw scores (the total number of answers that were correct) will be arithmetically converted to a scale that ranges from 0 to 100 that takes into consideration differences in difficulty among different versions of the tests."
In addition, a pass mark of 75% is required to pass the Code of Ethics knowledge area, while all other areas require a 50% pass mark. These would all be scaled to calculate the overall scaled pass mark.
Existing financial advisers will be required to pass the exam before 1 January 2021, while new or returning advisers will have to do so from January 2019 after completion of a tertiary degree and before commencing their professional year. FASEA said it is considering a different set of questions for new advisers.
FASEA also said it is currently undertaking a procurement process with specialist service providers as to the development and delivery of the exam and will look to provide an update on this process in the coming months.
Consultation on the exam's content is open until 31 July.