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Head to head: Should the FSA allow grandfathering?

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Following Treasury select committee member Mark Garnier’s interview in last week’s Money Marketing, two leading financial services industry figures put their cases over whether the FSA should allow RDR grandfathering for experienced advisers.


’Recognise the high quality of advice already being given’

Ken Davy
Chairman, SimplyBiz

When a highly respected member of the Treasury select committee, Mark Garnier, brands the proposed qualification requirements for existing advisers as “outrageous”, I believe all of us, including the FSA need to pay careful attention.

I applaud those advisers who are already diploma-qualified and chartered and I am sure their designations will help enhance their business but for those who are not there yet, we should have a more pragmatic transition.

By increasing the focus on alternative assessments and removing the cliff-edge date, we can adopt a more sensible approach to raising qualifications while at the same time continuing to service the clients who need and want high quality financial advice from trusted professionals.

I have campaigned for greater professionalism for years but what we find ourselves in now, under the current proposals, is a ridiculous situation where thousands of high quality advisers with good professional standing are threatened with expulsion after 2012 for no good reason.

The idea that up to three million clients, most of whom will be elderly, would be denied access to their trusted adviser, who they may have been served by for 10 to 20 years is completely wrong and against the regulator’s aim of increasing access to financial advice for consumers and treating customers fairly.

What we need is a pragmatic approach to higher qualifications and not a date that will symbolise rejection from the profession for a considerable number of advisers.

We should recognise the high quality of advice that is already being given by the sector and the high level of consumer satisfaction, as shown by the Financial Ombudsman Service figures.

The article received a tremendous level of support from the Money Marketing audience, the majority applauding the common-sense approach outlined by Garnier.

The large number of comments in response to the story appreciated not the damning of the increase in qualification but the lack of flexibility and the steely attitude to any who may not make the deadline when it comes to passing their exams.

Financial advice seems to be a profession on its own when it comes to grandfathering - it was allowed in the nursing profession - one professional has the consumers’ heart in its hands and the other its financial future, not altogether different in my mind.

Moving on to the question of commission and the banning of this structure under the RDR, I find it counter-productive to advisers and consumers and a step back from where we are today.

Since 1991, consumers have had the option to pay by (pure) fees and most still continue to pay for advice by commission or fee offset (commission). Surely, giving consumers the choice on how they pay is more in line with treating customers fairly than dictating that they must pay by a fee.

I believe that what consumers want from our profession is greater transparency and a simple way to assess product charges and remuneration. They want to know in simple terms how much the product costs and how much the advice costs, they do not want to have their options removed. Surely the “big society” is not about removing consumer choice.

The cost of the introduction of adviser-charging to product providers has also been grossly underestimated. Indeed, the most likely result will be a further reduction in product availability and client choice. In addition, it risks creating provider bias brought about by systems’ capability rather than quality of product.

We have seen no evidence either from the FSA or elsewhere that justifies these costs, nor has any evidence of substance been produced to warrant the risk to consumers that these outcomes create.

We believe that the FSA’s objectives in this regard, as far as they can be ascertained, can be met at minimal cost through increased transparency.

As they have at present, it is the client’s absolute right to have the choice as to how the advisers are remunerated.




’Delivering advice is not same today as it was a generation ago’

Martin Bamford
Chartered financial planner, Informed Choice

It was interesting to read the comments from Treasury select committee member Mark Garnier, who has called on the FSA to allow grandfathering.

I understand and appreciate the apparent groundswell of support for this grandfathering option but the bottom line here is that many advisers have been ignoring the inevitable.

For whatever reason, they have avoided doing what is required to meet the new standards and have instead chosen to wait for an alternative solution to emerge.

Higher professional qualification standards form a core part of the RDR for a good reason. Delivering advice in a regulated environment is not the same today as it was a generation ago. This is partially the result of changing regulation but mainly due to the increasingly complex financial world in which we operate.

A set of benchmark qualifications from the 1980s no longer sufficiently demonstrates competence when it comes to the technicalities of advising today.

Yes, experience counts, assuming, of course, it is relevant experience. In fact, the combination of this relevant experience and relevant qualifications is what makes for a well rounded and, dare I say it, professional adviser.

To argue that clients do not demand their advisers hold these new benchmark qualifications is not the point. If clients understood what was at stake, their opinions on the matter would differ.

We know from experience that clients actively seek out advisers with higher-level professional qualifications, as part of a bundle of requirements they look for when selecting a new adviser.

To claim that these new requirements have been thrust upon the adviser community with insufficient time to complete them is also wrong.

The regulator has been consistent in its call for an improvement to the previous minimum qualification benchmark for as long as I can remember. I have heard the avoidance of facing up to the RDR challenge by some advisers described as “watching a train crash in slow motion”. Our profession has been on these tracks for a decade or more. Save some divine intervention, this result was always on the cards.

Waiting for divine intervention makes for a lousy business plan.

The comparison that Mr Garnier makes in his comments to the qualifications held by people at the FSA adds nothing to the debate. The FSA, and the individuals it employs, do a very different job to financial advisers. They do not deliver financial advice to individuals as we do. A very different skill set and qualifications to support this are needed.

I completely empathise with advisers who find themselves in the very unpleasant position of having to pass exams in a defined period of time to continue with their careers. Exams can be tough to pass, particularly when you put yourself under unnecessary pressure to pass them quickly. Advisers with lots of experience in their chosen business areas should have no issues with the technical knowledge required. It is more likely to be finding time for study and honing examination technique that will pose challenges.

For advisers who have left it too late or made the decision not to rise to the challenge, there are alternatives to consider.

Talk of a mass exodus of advisers at the end of 2012 has been done to death. I suspect, in practice, many will continue in some form or another, rather than retiring or changing careers.

Like all advisers who have already obtained a QCF level four qualification, I still face a couple of years of gap-filling through structured CPD and possibly more exams. This learning game and demonstrating competence through qualifications is a lifelong activity. We all do CPD each year to keep up to date but this has never been particularly well structured when compared with other professions.

If we collectively accept the option of grandfathering, it would be hugely damaging to our profession. Clients are already wising up to the benefits of a future where their financial adviser needs to be better qualified and operate on a more transparent remuneration basis.

This is an opportunity for all advisers to do something useful towards restoring consumer confidence and trust in what we do for them. It would be a shame to fall so close to the final hurdle when a result like that is at stake.

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Readers' comments (48)

  • If the adviser sector had stood as one and offered a home cooked solution the regulators would have listened and given it a chance.

    The fact that the likes of Ken and Martin have their own agenda and refuse point blank to accept that you are all in the same boat is the reason why the loudest voices get heard, simply because they have the money (CII etc).

    It is frustrating to watch but I am glad I am not regulated, I bet ken is too.

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  • I agree with Martin entirely. I would add that these advisers who have done nothing (literally) to increase their level of qualifications during the several years that knowledge of this requirement has been in our industry deserve what is coming to them.

    They will now have to work even harder (and moan about it even more loudly) to achieve the benchmark and it will be no loss to the industry if they give up. Their clients will be snapped up by those of us that remain authorised and qualified and will be better served as a result.

    Frankly I am sick of this argument. Accept that you need to have more than a GCSE in basic advice to take £000s in implicit commissions from HNW clients (or Mr and Mrs Average for that matter), man up to the challenge and do what your industry requires of you.

    We will all benefit as a result.

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  • I don't want to be operated on by a doctor who's learning what to do by making mistakes on the job. I want one who comes trained, with evidence of such, and who has a good reputation.

    Similar goes for IFAs. Get trained. If your "experience" is as good as you say it is, you'll sail through the exams. After all - the exam is just another client situation, right?

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  • Ken Davy is a neanderthal in today's industry, a King Canute,one who believes he can push against the tide...that the status quo is where we should be. The advisory marketplace is a hugely different landscape from where it was 20 years ago and advisers need to reflect that change in the level of technical expertise that they have at their disposal.
    Ken will no doubt argue that years and years of experience should (pre) qualify an individual for the post RDR world. But how is an adviser to know if all that experience is good experience as opposed to 'bad' unless he has the technical knowledge to back it up. Poor knowledge and bad experience is the worst of both worlds.And just because someone has been in the market for ever and a day does not make them any good...
    And likening an adviser to a nurse is a is the doctor (adviser) that carries the responsibility and is a more appropriate analogy. Perhaps next time Ken is feeling unwell he would choose to see a doctor of Podiatry, one with 20 years experience. After all he is seeing a doctor, might not do him any good for the vast majority of ailments but at least he has seen a doctor. Might help him if he has an ingrowing toe-nail or bunions but not much else.
    The advice business is all about what sits between an advisers ears and unless individuals are prepared to invest time, effort and money in the best piece of kit they have then they shouldn't be in the industry. How do you know what you have 'learnt' has gone getting the pass certificate of course. No other industry would expect anything less.
    As for his continuing advocacy of commission. It just beggars belief that he thinks a third party should determine what a piece of advice is worth not the client/ advisor by prior agreement, unbelievable.
    Ken Davy is doing the industry a huge disservice by advocating grandfathering of advisers and retention of commission. I often think this sort of attitude is driven by either Ken wanting to protect the interests of some of his 'mates' or the need to keep SimplyBiz a viable business to sell in a few years time.
    Ken Davy is a behemoth in the industry, he should use his influence more wisely for the future of the industry not the past

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  • oh the siren voices of those already qualified!! Look at me I'm so clever and the rest of you are useless!!

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  • This is an argument which is dead and buried and everyone just needs to get on with it. If you have the experience then this should help you in your exams. Prove that you have such by passing them.

    As an older advisor with 28 years experience and one who does not particularly like sitting exams, grandfathering is both time consuming and to open to interpretation by those who are performing such.

    The only issue I have is with the array of exams and the monopoly which seems to be held by the CII. Secondly where can you get some additional study as the insurance companies such as NPI Scottish Widows etc were the places we used to rely on when doing such exams as G60 etc. Ideas please!

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  • It tickles me that the Advisor community have shut their eyes to the clear and obvious. The prime reason for this exam rush and fee only agenda - is aimed solely at devastating the numbers of Independent Advisors in the UK and leaving the Financial Institutions with a captive audience. Everybody with any sense must, (by now), realise that the FSA is just a union for these same institutions. Did I mention dual pricing?........

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  • The CII and the FSA are being entirely unfair and unreasonable. I have my Diploma axam and have done it early in anticiaption of RDR. Now however we're being told that thisi isn't enough, we have to "Gap Fill". I've done G60 and I'll have to "Gap Fill" on pensions, I've done G10 and I'll have to "Gap Fill". I've also done SVI and SI exams and I'll have to "Gap Fill" on investments. But the CII won't tell me for sure, because I'm not a member. Others have told me based on their experience. Anyone who has done the old Diploma or AFPC might as well have not bothered, the CPD requirements are so vague and will probably be so honerous that it will be easier to do the new R0 exams. Yes - bring in Grandfathering for people who have the old Diploma or AFPC at least. What about the "No Regrets" policy from the FSA?

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  • It's not that anonymous, it is just that they have time to write long blogs as they have the time due to having no clients to see or being in an cosy little office with a nice employed package............. The pictures sum it up for me........... Ken, a mature and professional looking guy in a suit and tie and then Nick, all open necked and casual...................

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  • 'Trained'? Who the Hell wants to be 'trained'? Do clientt's wnt you be trained on them, like a gun? What is needed is education, which is a Helluvalot different from training.

    The two factions in this argument are both missing the point. The point is that RDR is just another way in which the FSA can justify its existence.

    Martin also says "This is partially the result of changing regulation but mainly due to the increasingly complex financial world in which we operate.". Erm, no. Complexity is the result of an overweening bureaucracy, in the vanguard of which is the FSA and its ludicrous rules. Financial planning is essentially very simple, and keeping things simple is best for clients. The solution to this overcomplexity is not more 'training' for IFA's but to repeal all the complex rules and regulations and especially Brown's Bizarre Tax system.

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