The Financial Planning Association of Australia (FPA) has joined the swelling chorus of voices supporting changes to how financial planners are licensed and authorised to give advice.

The licensing regime for financial planners was under scrutiny even before the Royal Commission into Misconduct in the Banking, Superannuation and financial Services Industry turned its attention to financial advice and raised specific questions about the current approach. But the inquiry’s attention has given the issue a big kick along.

The current licensee-authorised representative structure is seen as lacking legitimacy and as being a significant impediment to financial planning evolving into a profession akin to law or medicine or engineering, among others.

In its written submission to the royal commission the FPA says there are “several options that could achieve the outcome of individual oversight of financial planners”.

The practical impact of each of the scenarios is to shift considerably more responsibility and accountability for the quality and delivery of advice to the individual practitioner, and away from the licensee entity as it currently exists.

This is consistent with the evolution of financial planning towards a profession. And it is also consistent with professional, ethical and education standards currently being developed by the Financial Adviser Standards and Ethics Authority (FASEA), which come into effect progressively between now and 2024 and impose additional obligations on the individual.

The various options canvassed by the FPA, which represents about 13,000 individual advisers, would affect the current roles of key players including practitioners, licensees, professional associations, the Australian Securities and Investments Commission (ASIC), the Tax Practitioners Board (TPB) and the Financial Adviser Standards and Ethics Authority (FASEA).

The FPA’s submission says one option could be that before an individual adviser can be authorised by a licensee to give advice they must obtain a certificate to practice from an approved professional association.

“A practicing certificate could only be issued if the individual satisfies a minimum standard set by the general law, and meets the new education and professional standards requirements for financial advisers,” the FPA says.

“ASIC would continue to license organisations under the Corporations Act (similar to the [Financial Services Authority] approach in the UK).”

Alternatively, the FPA says, a statutory or independent body, separate to ASIC, could assume responsibility for individual adviser registration. In this scenario individual advisers would have to meet and maintain compliance with registration criteria, and would have to be registered before they could be authorised by a licensee. Again, ASIC would continue to license organisations under the Corporations Act.

The FPA says a third option could be for ASIC to take responsibility for licensing both organisations and individual financial advisers. That would be a significant task, with about 24,000 individuals currently listed on the financial advisers register (FAR).

And in fourth possibility is for the TPB tax (financial) adviser registration requirements to be made compulsory, meaning all individuals providing tax (financial) advice services would have to register with the TPB. Under this proposal, the FPA says, ASIC would continue to license organisations under the Corporations Act. The FPA adds that for this to work, it might be necessary to broaden the definition of tax (financial) advisers, tax advice or the TPB regulation of all individuals providing financial advice.

Under the FPA’s suggestions each individual adviser would need to comply with all of the relevant education, professional and ethical standards required by law, but monitoring their compliance would fall to either the body responsible for registering the advisers, or to an appropriately resourced and approved professional association.

It sounds very much like the FPA is suggesting it could take on that role itself

When the key industry association appears to be throwing its weight behind a shake-up of the licensing regime, the debate has irreversibly gone from being a relatively fringe, left-field issue to the mainstream, and worthy of further discussion and analysis.

If the fat lady isn’t actually singing for the current licensee model yet, then she’s certainly clearing her throat – and the orchestra is tuning up.