I have recently met with two financial advisers and am trying to decide which one to do business with. Both have an impressive array of letters after their name although they are not the same. Can you tell me what qualifications an adviser should have and the main designations used in the industry?
All financial advisers are required to achieve at least a basic level of qualification before they are allowed to advise clients. The basic qualification is achieved by successfully completing three exams commonly referred to as the Financial Planning Certificate (FPC).
Anyone offering mortgage advice is required to hold a further basic qualification – either the Mortgage Advice Qualification (Maq) or the Certificate in Mortgage Advice and Practice (Cemap). Opinion on the academic standard of the basic qualification varies between commentators but most accept that it compares roughly with a challenging GCSE or O level or perhaps an A level.
Once an adviser has reached the basic entry level, they can choose to further their education and expertise in much the same way as someone with A levels can go on to obtain a degree, an MA or MSc and eventually a PhD or DPhil.
While many extremely talented advisers have become so because of their many years of experience in the industry – not because they were forced to obtain qualifications – there is often a correlation between a good adviser and a commitment on their part to learn as much as possible about a particular subject. This commitment often expresses itself in a willingness to test this learning by means of various exams, which allow those who pass to claim various designatory letters for themselves.
There can be little doubt that having extra qualifications helps to reassure clients that their adviser takes professional knowledge and continuing education seriously.
The most common method of furthering education is by working towards the Advanced Financial Planning Certificate (AFPC), which requires the adviser to pass three advanced exams from a variety of options including personal investment planning, portfolio management and a compulsory paper on tax and trusts. From here, advisers can choose to sit more advanced exams to achieve further knowledge and more credible designations.
However, having letters after your name is no guarantee of intelligence, professional ability or decent service. Simply because an adviser has a string of designations does not necessarily mean that they have furthered their education – they may hold nothing more than the basic entry-level requirement. Some designations simply indicate membership of particular trade bodies.
An adviser who only has the basic qualification and is a member of the Life Insurance Association is permitted to use the designation MLIA(Dip), a member of the Society of Financial Advisers can use FPC and a member of the Institute of Financial Planning can use MIFP.
It could be argued that anyone using these designations is doing so with the sole intention of impressing their clients, who will be ignorant of the fact that the adviser has achieved only the minimum level of qualification. Joe Smith MLIA(Dip), FPC, MIFP, AIP might look impressive but do not be fooled – he has passed only the minimum required level of financial services qualifications (oh, and has an NVQ2 in plumbing and has paid subscriptions to the Institute of Plumbing).
Achieving the AFPC leads to the more credible designations ALIA(Dip), MSFA and AIFP. A further three advanced exams lead to FLIA(Dip) and ALIA and a further four advanced exams can lead to FSFA. But it should be appreciated that anyone using two or more of these designations has not achieved two or three times the qualification level – they are simply a member of more than one body.
Other credible designations which do involve additional study and specific advanced qualifications beyond AFPC level include FIFP (Fellowship of the Institute of Financial Planners) and ACIB (Associate of the Institute of Financial Services/Chartered Institute of Bankers). There are others but, before being impressed, check them out. A guide is published on IFA Promotion's website at www.unbiased.co.uk.
The FSA is currently undertaking a review of the qualification system and designations that advisers can use. It is possible that there will be significant changes in due course to help members of the public have at least a fighting chance of identifying exactly how qualified an adviser is and not before time.