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FSA cost analysis fails study time test

Sesame has slammed the FSA’s cost-benefit analysis of the RDR, insisting the regulator has “seriously underestimated” the cost per adviser of obtaining a QCF level four qualification.

The FSA’s cost-benefit analysis puts the cost of higher qualifications at £2,500 per adviser.

In its response to the latest RDR consultation paper, Sesame says the figure might cover exam fees and study material but fails to reflect the time-cost of studying.

It says: “Most firms will need to put in 300 to 400 hours studying to pass these exams. It is very difficult for an adviser running, or working in, a small business to take time away from servicing clients in order to study for exams, not least when the trading climate is difficult.”

Sesame says only a work-based assessment scheme will provide an adequate alternative to exams rather than an oral equivalent of the written exams.

The network believes the FSA’s estimate that 20 per cent of advisers will leave the investment sector is too optimistic and that the CBA does not address the issue of orphaned clients after 2012.

An FSA spokesman says: “Adviser study hours are a consideration as part of our cost-benefit analysis but there are too many variables to put an exact figure on the time that each adviser will have to spend studying.

“The estimate of £2,500 was provided by Deloitte, which we commissioned to conduct independent research into the cost of the proposals. We have no reason to doubt that figure.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. More drivel from the FSA. As usual, the answer to the question depends on the question you ask and I presume that Deloitte was asked the cheap question. Based on the loss of a charge-out rate of £100 per hour the cost is more like £30,000-£40,000.

    No doubt the FSA would then argue that you’ll be able to charge even more for your time when you’re better qualified!!

  2. As ever, the outcome of any such cost:benefit analysis depends very largely on how the parameters for it were framed by the body commissioning it, in this case the FSA. Should Deloittes come up with a set of conclusions that do not accord with those wanted by the FSA, then the chances are they won’t be commissioned to do the next report. A different and more pliant firm will be chosen instead.

    If, as it claims on its website, the FSA is an open and transparent regulator, then it should publish IN FULL the brief given to Deloittes for the RDR and publish IN FULL the report produced by them (not least the benefits expected to result from forcing all advisers to achieve the new qualification benchmark). Surely, there are no good reasons for keeping such material confidential?

    And anyway, why weren’t AIFA and similar bodies consulted first?

    The cost:benefit estimates (for that is all they can be) of imposing QCA Level 4 as the de facto standard is just one aspect of the whole foundation of the RDR. Given its significance, the FSA should surely publish all material on the RDR for all to see, for all to analyse and for all to challenge as appropriate. Most people would reasonably consider that to be a true example of what constitutes a genuine policy of openness and transparency on the part of the regulator.

    But when has the FSA ever seen fit to accede to anything such as that or even to take any meaningful notice of feedback from those it regulates? Most people regard the FSA’s idea of consultation as little more than mere tokenism. All it has said so far is that the RDR will be going ahead as planned. So in what areas has it modified its any of its plans in the wake of consultative feedback? None that I have so far read about.

  3. The FSA figure (unamed note) said We have no reason to doubt that figure.” If just one person had told them what Sesame have said in their replay to the latest RDR paper BEFORE this (unamend) FSA individual made that statement I think one could say it is a blatant lie as once someone as large as Sesame has said this, they MUST have some doubt rather than none. If paid for (without an insurer funding training etc), then the MINIMUM four CII papers required including exam prep course, exam guide, revision workshop and exam entry (assuming first time pass) would cost £2,596 (for a non member based on their Info for candidates booklet 2009) or there abouts. Bearing in mind only 40-50% pass first time, the true cost is higher and once you factor in study time, travelling time, costs of getting to the exam venue etc as Steve Laird says, the cost to the business of getting to Diploma is probably indirectly in the region of £30-40K.

  4. i am faced with the same dilemas as all other IFAs wishing to remain, and be, committed to this industry, but £3k cost to us to prepare and take the exams ,is a nonsense. Thinking that these ‘higher’ qualifications will improve the quality of advise given and therefore better for the CLIENT, must have been dreampt up whilst the fsa ‘think tank’ at a christmas bash was on ganga!

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