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Professional attitude

Running a professional body for financial advisers is a job for professionals

The Money Marketing Leader of August 17 said we need a debate about what exactly professionalism means.

This followed a call by Sesame chief executive Patrick Gale for IFAs to focus on improving professional standards and leave fighting injustices to Aifa.

If we look at the paths taken by others who are regarded as professionals, they all involve setting up a professional body to be the custodian of standards, with individuals acquiring qualifications and the knowledge they need in order to do a professional job in their chosen discipline. In many cases, such professional bodies have regulatory functions but in our case the regulatory function rests with the FSA.

So what we need is a professional body which is focused on the job of assisting its members to regulate themselves effectively to become fully professional. In a time when the FSA is moving to principles-based regulation, setting objectives and letting firms find their way to achieve them, this is essential if standards are to be even maintained, let alone raised.

This is the reason we created the Personal Finance Society at the beginning of last year. No existing industry organisation was doing that professional job for financial advisers. Some of us had been involved in a debate for the previous 10 years or more about creating a professional body for the financial advice sector but no firm steps were taken until the Life Insurance Association and Society of Financial Advisers decided to merge to create that professional body.

The PFS is not just Sofa and the LIA added together, it is a professional body which will work to help members improve professional standards, promulgating practice standards and toolkits which will be the guidance which the FSA is looking for.

Where do trade bodies like Aifa feature in this? The job of a trade body is to promote the interests of its corporate members. Although the FSA has said on a number of occasions that it is looking for trade bodies to produce practice guidance, trade bodies may find that their members wish to further their commercial interests more than their professional standards. If, like Patrick Gale, you see the two things identified, that is fine, but it is not necessarily the automatic outcome of a discussion in a trade body about practice standards.

So there is a need for independence and that is where the professional body comes in. A professional body whose objectives are customer service and public confidence, as are those of the Chartered Insurance Institute and the Personal Finance Society, is the natural home for the standards-setting function.

What should the trade bodies do about professional standards? First, they should support in general standards of professionalism. Second, they should take practical action to ensure that such standards are the norm throughout the industry by persuading their member firms to have a relationship with the professional body, which in practical terms means that every individual working for those member firms becomes a member of the professional body.

The firm can pay their membership dues or they can just promote membership but, by one means or another, they need to ensure that all their people are signed up to the professional agenda by being members of their professional body.

If we do all this, standards of advice, standards of qualifications and a more professional approach to running advice businesses will all result. The industry’s reputation will improve. We will have gained back from the FSA and the Government freedom of action which has been circumscribed by prescriptive regulation and the industry’s addiction to it.

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