Aifa is questioning whether retail distribution review proposals for mandatory higher qualifications will get past the European Commission and is warning they could create an anti-competitive market.
In the second of its RDR issue papers focusing on market segmentation, Aifa highlights the fact that Mifid does not stipulate the need for mandatory qualifications.
It says the current minimum benchmark qualifications in the FSA’s new T&C sourcebook are justified as a super-visory tool. The paper asks: “How would the EC view mandatory higher qualifications in the UK and, if imposed, would they create an anti-competitive market for UK advisers?”
It also questions how the “sub-optimal” outcomes of primary advice would sit next to the Newcob/Mifid suitability requirements that come into effect across Europe from November.
Aifa’s analysis paper supports the FSA’s calls for raising professional standards but says the focus should not just be on higher professional qualifications.
It says it is not convinced that the current segmentation proposed by the FSA is being correctly labelled and is worried that primary advice could pose a risk to consumers.
It questions whether the word “professional” is appropriate in the context of segmentation as it could send out the wrong message about the other advice segments.
The paper also asks how incentives for firms to adapt to certain business models through regulatory dividends would apply to a firm with a mixture of advisers.
It says the current proposals do not recognise the gap in standards between certified financial planner and chartered financial planner status.
The report says: “Both are credible and worthy desig-nations but there would need to be clarity over the minimum qualifications required for PFPs and whether member-ship of a professional body would be mandatory.”
Deputy director general Fay Goddard says: “We want to ensure the review delivers a better and not just a different regime that has clear benefits to consumers and delivers a robust advisory sector. We urge members to get involve and send us their views.”
Issues raised by Aifa on market segmentationl
- More clarity is needed over the minimum qualifications required for PFP and whether professional body membership would be mandatory.
- It would appear that PFPs could continue to get commission for protection and mortgage business “at least for the moment”.
- Clarity is needed over regulatory dividends for firms with a mix of adviser types.
- Is the word “professional” appropriate in defining the PFP?
- There is potentially little difference in benchmark qualifications for GFA and PFP, highlighting the importance placed on professional body membership and fee-based services.
- Is ongoing continuing professional development and grandfathering appropriate rather than current advisers taking further exams?
- Can the Financial Ombudsman Service endorse primary advice when it has a duty to consider whether a firm has been “fair and reasonable” in dealing with consumers? How does it view sub-optimal advice?
- How does primary advice sit with Newcob/Mifid suitability requirements?
- The RDR assumption that consumers earning £25,000 to £50,000 cannot afford or access advice “is simply not true”.
- Questions over the need for primary advice at all, with a combination of focused advice and non-advised sales potentially a better option.
- How would the EC view mandatory higher qualifications and would they create an anti-competitive market for UK advisers?
The proposals do not recognise gap in standards between certified financial planner and chartered financial planner.