Ensuring quality in any walk of life involves setting minimum standards. With implementation of the RDR in January, the FSA will raise the bar for financial services by increasing the minimum qualification for advisers from QCF level three to level four.
The new requirement is broadly equivalent to the first year of a degree, but some advisers are choosing to go the extra mile to level six. As the equivalent to the third year of a degree, level six has the potential attraction of enabling advisers to apply for chartered status – commonly perceived as the gold standard which puts financial advisers on a par with other professions such as accountants.
There has been much speculation that the FSA’s drive to improve professional standards further will lead to QCF level six eventually becoming the minimum requirement. But CII director of financial services and insurance markets Steve Jenkins does not expect this to become compulsory.
Jenkins says: “There is no signal of any regulatory change and there is nothing to say it will happen on a mandatory basis. However we are seeing a significant surge towards level six, which is seen by advisers as a good thing to do – and not because the regulator is telling them to.”
Jenkins says around 30 per cent of CII members are moving beyond the minimum, and believes that raising the bar to level four is a trigger for that, rather than concerns about the regulator potentially moving the goalposts. He says that there are over 3,000 chartered individuals and around 400 chartered firms among the CII membership. “What we have in financial services is an emerging profession but we are seeing that move of its own volition in the industry.”
Chartered financial planner and CII accredited trainer at the Financial Adviser Academy Mark Thewlis points out that chartered status was the FSA’s original target when the first RDR consultation paper was issued in 2006.
Thewlis says: “Chartered is the benchmark within other key professions such as accountants and solicitors and this level would seem to be the appropriate next step if the new level four was at some point in the future seen as not being adequate.”
Legal & General savings director, platforms & policy Danny Wynn has a similar view. He points out that at the beginning of the RDR consultation process, the consumer lobby were pushing for a straight jump from QCF level three to six. He says: “To the credit of the FSA it listened to the concerns of the industry and opted for the much smaller step of level four. But if the regulatory authorities continue to perceive issues with the quality of advice in the industry, it seems highly likely that a further increase in the qualification standards will be implemented.”
Scottish Widows head of distribution development Robert Kerr goes a step further. He expects level six to become the regulatory requirement.
He says: “We believe it is highly likely that the qualification requirement will eventually migrate towards level six. The timing or any intermediate step is not yet certain – however, we would recommend that any adviser who is seeking a long term career in the industry should strive towards a level six status.”
Thewlis believes that advisers who see themselves and their firm staying in the industry understand the commercial advantage of chartered status or the commercial disadvantage of not being chartered.
He says: “However, the step up from level four to level six is a big leap and requires additional academic ability given the current examination structure. So, as the regulator found when it originally proposed level six, there would be an outcry. It would mean that while everyone would want to achieve the higher level, it simply would not be within reach of many existing industry professionals.”
Qualifications provide a foundation for competence in giving advice, but exams are one part of a wider skillset. NFU Mutual adviser propositions manager Peter Wallin points out that advisers also need to possess ‘people skills’, so that they can guide clients towards the best solutions.
Wallin says: “Any industry or profession wants and needs to improve. One of the ways they do this is through higher qualifications, so there will be a natural trend to move from QCF level four to six. But this should be determined by the expectations and needs of individual clients.
“All professions require flexibility in qualification and status. Just as many accountants are not chartered, but provide a competent, professional service to the clients they serve, then this should be the case within financial advice. There needs to be flexibility in the industry to look after the varying needs of differing clients.”