Is FSA training and competence too much too soon?
Those who believe gaining qual ity and competence within the industry has gone as far as it should are few and far between these days. Following debacles beginning with Barlow Clowes and continuing through to pension misselling and endowments, treating the industry more as a profession and making it less easy for poor quality advisers to be let loose on the public has gained a large measure of agreement. Training and admission requirements have been moving forward to reflect this.
Matters have been raised a few notches by the FSA which published Consultation Paper Number 34 in November 1999 examining propo sals for training and competence.
The FSA then published its feedback in July 2000 with two new sets of draft rules relating to record-keeping and transitional arrangements and sought yet further consultation.
It is now envisaged the final training and competence rules will be published towards the end of the year.
As with all major initiatives of this kind, consultation papers tend to be unwieldy. The responses were fairly widespread from all manner of org anisations ranging from the ABI to networks. Nonetheless, this does not necessarily measure how feasible these arr angements are on the ground.
You cannot argue with the theory. Stan dards of competence are a key to the consideration of the UK's international position and are a prerequisite to achieving the FSA's objectives of consumer protection, market confidence, public awareness and the red uction of financial crime.
The rules will concern recruitment and training, as well as attaining, maintaining and supervising competence. It is the attainment of competence which could raise most eyebrows.
A part of the req uirement is for emp loyees to have passed an app-roved exam ination or gained exemption. There is a separate examination for each activity and employees will be required to have passed, as a minimum, the regulatory component of the relevant approved examination.
The consultation paper proposed that an employee engaging in an activity with private customers would be required to complete the appropriate approved examination within two years of starting that activity.
There will be similar time limits for other categories of work. The examinations are an attempt to bring under one umbrella a new examination reg ime and cut out inconsistencies between the various requirements of constituent regulatory bodies.
In the feedback to the consultation, a wide range of firms, professional bodies and trade associations exp ressed difficulties with the requirement for the individuals to pass the appropriate examination within two years of starting the activity.
The FSA recognises that there are practical issues in this respect and will be proposing to introduce different time periods for different examinations so that individuals have the incentive to reach the right standing within a reasonable time. Quite what this means is unclear.
Until the final rules are published, it is difficult to see whether the FSA has fully taken on board practical issues that are bound to exist. A toolkit is being designed to meet the business and regulatory needs of IFAs and this will contain sections relating to recruitment, training and competence issues as well as the examination itself.
Nonetheless, even though the motives may be well intentioned, there is bound to be a fear among smaller IFAs that they will be festooned in paper and red tape and there will possibly be a lack of understanding of what is required.
Whatever the practical difficulties, however, it cannot be denied that the image of IFAs and, indeed, financial services generally, has taken a battering.
When the Gov ernment took power in 1997, it tightened the noose on pension mis selling in a way that surprised many and it has kept up the pressure ever since.
There is a fear that the Gov ernment lost patience with IFAs and sees the future as only with big organisations which it can have a direct influence over.
The key to the public image of IFAs is through the FSA. Provided that IFAs can work with the FSA in endorsing a will to modernise, then the FSA and Government may feel more relaxed about those providing financial advice.
It may be difficult to endorse warmly the overtures of a body which some feel to be over-critical and which, arguably, has treated IFAs as wrongdoers without a fair trial, for example, over pension misselling.
But the industry has to do its best to work with the FSA on all these issues to ensure its survival.
Consultation papers may be heavy reading but there is no point in complaining after the event if nothing is done when invited. That is why the FSA is near to final rules and all within the industry should acquaint themselves with these.
There will be transitional provisions for individuals who are competent on the specified day. They will continue to be so after that day, assuming competence is maintained, which also involves standardising record-keeping. Where an employee is not yet competent but is under going training, the employee will come into the new course book as from the specified day.
It may be that only those within the industry, the Gov
ernment and the FSA are aware of the substantial steps being taken to improve standards in financial services.
For a sceptical public, the jury will still be out and will remain so for some time.
Having set the standards, it is not only up to the industry but also the FSA and the Government to keep them up and then extol the virtues of financial services in this country.
Whether the industry can survive another debacle regardless of all these new measures is something which remains a moot point.
Is FSA training and competence too much too soon?