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One day a word is used rarely, then it gets used to excess. The retail distribution review has led to two such words falling under this heading - “alternative” and “proposition”.
Do we need an alternative to exams?
Source: Michael Walter/Troika
The long, drawn-out process over the alternative to exams has simply served to underline the fact that exams are not perfect but, to paraphrase Woody Allen, they are the least imperfect option that we have.
The idea that file checks ever had a hope of being a competence test was only ever suitable for firms with a single employee, hence its advocates who align with that business model.
Given the proliferation of suitability letters created by automated solutions, I need to ask you to consider just how many files would be entirely one person’s work. The other question is how many files would be almost or, in many cases, entirely transactional in nature? I do not even want to begin to consider if the advice would be seen to equate with competence at the now legendary level four.
Some senior figures in the industry have voiced their shock at the “withdrawal” of the file checking option. They seem to forget that it was only ever an option they floated and the FSA said they would consider. In my opinion, the regulator has taken a pragmatic view and rejected the file-checking option as it is simply unworkable. With supporters of the file check having nailed their colours so firmly to the mast, how will they now help those cast adrift by their fragile logic following the loss of the stud-ent’s most scarce resource - time.
If the concept of an alter-native turns out to be exam by interview, detailed questions will mean interviewers having to ask supplementary questions based on the initial responses. Given all that is involved, you will also realise that this process is not in the same price band as exams. So, there we have it, something that has animated many and will now without exception disappoint all that saw it as their salvation.
The other word in heavy usage is “proposition”. Now I know that it is often referred to in the singular but when I last looked it was not illegal to offer more than one proposition. This does not mean that you should retain the habit of doing business with anyone who approaches your firm.
You need to take the time before 2013 to find out what works best for you.
All the discussion about propositions can lead you to think that there is only one correct option. We only need to consider those who pivoted from indemnity commission to funds under management, only to suffer when the market dipped. You need to have balance in income streams to prosper and to be able to invest in developing and refining your proposition(s).
In summary, alternative testing may be on the wish list of many but it is its definition that matters and that is equally true of proposition. Definitions are important as, without them, communication is in chaos. We need to ensure these two words have real meaning and are not lost in translation.
Robert Reid is managing director of Syndaxi Chartered Financial Planners
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Readers' comments (11)
phil melville | 3 Aug 2010 4:50 pm
Given Roberts close association with the CII you might think he would say that wouldn't he !
The unseemly game of my dad's bigger than your Dad currently being played out between suppliers of distance learning courses has become rather distasteful and the commercial greed involved makes some of the other RDR issues seem rather tame.
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John Blackmore | 3 Aug 2010 5:00 pm
Do we need an alternative to exams ?
Yes - and the alternative is called grandfathering.
The vast majority of advice given and products sold today do not require any extra qualifications.
We already have specialist exams for more complex situations. So simply allow all current advisers and sales people to stay and restrict authorization to advise or sell to simple regulated products ?
Those who want to deal in complex advice could then get on with higher exams leaving the remaining 95% to deal with normal everyday business.
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Julian Stevens | 3 Aug 2010 5:14 pm
Suitability Letters created post-sale by automated systems are a travesty of advice and should be banned outright.
But they won't be, for the simple reason that the institutions which use them most avidly are the banks and building societies. The kid who flogged the product for maximum commission will almost certainly have almost no input to the Suitability Letter. He certainly won't have gone through it line by line with the client before presenting the application form for signing ~ as should most certainly be a fundamental requirement of the sales process.
You see? The RDR doesn't address the fundamental problems with which the industry is beset. Rather, it's a carefully engineered distraction from them. Shame on you FSA.
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Anonymous | 3 Aug 2010 10:20 pm
Ah, here we go again with grandfathering. 'I've been doing this for XXX [insert number here] years'. Therefore I know everything there is to know, having made the same mistakes over and over again over the last 20 years.
Oh dear, oh dear. Please leave the industry by the door marked 'RDR emergency exit' while those of us left will attempt to construct a profession out of the wreckage of decades of ex direct sales guys and girls flogging any old crap that the Life Co's wanted them too.
We that are looking forward to 2013 can see a bright future for professional advisers. Hell, clients might even start to trust us when the idiots have gone to sell used cars!
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Gordon | 4 Aug 2010 9:53 am
Would anyone trust a Surgeon to operate on them that was not professionally qualified? We will look back in the future and be amazed at the "quacks" we had in this industry/profession.
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Anonymous | 4 Aug 2010 10:10 am
to anonymous @10.20 Hope you have plenty of capital in reserve - you will need it for all the future Keydata type claims foisted onto advisers. The only difference will be fewer advisers to share the cost.
The future is indeed looking bright for those of us with plenty of money to spare.
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John Blackmore | 4 Aug 2010 11:16 am
@Gordon - are you seriously suggesting that Q level 4 exams are sufficient to be considered a professional ?
I certainly wouldn't take advice on complex matters from anyone so poorly qualified.
For those in need of genuinely complex advice level 6 ought to be the minimum.
Those selling properly regulated products ( which is most people no matter what they think or pretend) need no more than level 3.
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paolo standerwick | 4 Aug 2010 11:42 am
Agreed with JB Grandfathering and make all regulatory staff pass same exams as well. Whilst those enforcement teams must be monitored by experienced managers who have been in teh field of advice before telling the industry what to do!
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Derek Gair | 5 Aug 2010 1:29 pm
What a truely sensible post (both posts) on the subject by John Blackmore - that are both workable and cost effective - more power to your elbow !!.
No need to spend the multi millions on RDR which simply wont work anyway but will inflict huge damage on an industry that isnt broken and more importantly, the public it already transacts business with perfectly well. Its not about qualifications its about relationships and trust.
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Peter Turner | 6 Aug 2010 9:11 am
I agree with Julian.
When I look at a file the SR tells me so much about the adviser.
What I want to know is what the client wanted/needed to achieve, why the adviser thinks the product recommended contribute to that achievement and the drawbacks and limitations, not a blatant-back covering exercise.
I also agree with John Blackmore. Level 4 or level 6 will enable an adviser to take on more complicated scenarios competently but the main problem is level 3 advisers not ensuring their clients actually understand what they are doing when they buy a product.
If the adviser cannot do that then a level 4 qualification will only give them more science to blind their clients with.
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