Current licensed financial advisers will be provided with a transition process to ensure their education levels meet new requirements proposed by the Federal Government.

From July 1 2017 all new financial advisers will be required to hold a degree, have one year’s work experience and pass a national exam.

Current advisers will also have to pass the exam. Their transition requirements will be decided by an independent industry-established standards body that begins operations on July 1 next year, setting educational and professional development standards and creating a code of ethics for advisers.

The code will take effect from July 1 2019.

Assistant Treasurer Kelly O’Dwyer says the changes form part of the Government’s response to the Financial System Inquiry.

“These reforms have widespread support across industry participants, professional bodies and consumer representatives of the need to raise standards for financial advisers in order to improve public confidence and trust in the sector,” she said.

Consultation on the proposed legislation closes on January 4, with the Government expecting to introduce a bill to Parliament soon after, ahead of a July 1 start date.

Meanwhile, the Government has released draft legislation enabling the Australian Securities and Investments Commission (ASIC) to set terms of commissions and the clawback period.

The legislation will be based on the Life Insurance Framework, released last month.

“Ultimately, the final form of ASIC’s instrument will be a matter for ASIC, as the independent regulator,” Ms O’Dwyer said.

“The Corporations Act will also be amended to ban other volume-based payments and grandfather existing arrangements in a manner broadly consistent with the Future of Financial Advice reforms.”