The FSA’s retail distribution review feedback report, published on Tuesday, reveals that new entrants will have to reach this level by 2010, with all existing advisers having until December 31, 2012.
Grandfathering of existing advisers has been ruled out but “on-the-job testing” is still a possibility if a cost-effective, practical solution can be found, says the FSA.
The regulator says advisers with existing qualifications at QCA level four or above can fill in any gaps in new knowledge requirements by continuing professional development.
The FSA will set up an independent professional standards board to oversee the new minimum standard and oversee CPD for advisers who are not members of a trade body.
The Independent Professional Standards Board would initially be a part of the FSA and should be running by 2010. There are also plans to introduce a register of advisers for retail investors.
A code of ethics, also overseen by the IPSB, is to be introduced “as soon as practicable in 2010” and advisers may have to display a practising certificate issued by the IPSB.
Securities and Investment Institute chief executive Simon Culhane says the report is “a step-change for the retail financial services industry”, raising standards and education of financial advisers. Aifa says greater professionalism should not drive out existing good advisers.
But Highclere Financial Services partner Alan Lakey believes the proposals could push up to 40 per cent of IFAs out of the market as anyone in his position, with Cemap and FPC 1, 2 and 3, will have to sit four more exams while running a business.
Lakey says: “I have got four years in which to pass four exams, three of which will not enhance my business because they are in areas I do not work in. I do not want to waste my time taking these exams. If I do, I have got to pay around £120 per exam, probably spend 100 hours for each exam and I am going to also have to pay for course materials.”