Overhauled standards for firms unveiled by the Chartered Insurance Institute are essential to weed out firms “masquerading” as chartered, advisers say.
Last week, Money Marketing revealed chartered firms must ensure a quarter of their advisers are chartered by July 2017, rising to half by January 2020.
Previously, the CII required chartered firms to have one chartered board member and 90 per cent of customer-facing staff to be members of the CII or Personal Finance Society.
The CII is introducing a number of additional higher standards which will come into effect from July, and will sample test 10 per cent of firms.
CII director of financial services and insurance markets Steve Jenkins says: “Chartered status is becoming more popular, and that means we have a responsibility to ensure the requirements are fit for purpose.
“When customers engage with a chartered firm they should not have to look far to find a chartered financial planner.”
Advisers have welcomed the changes, arguing the previous requirements were too weak.
Aurora Financial Planning chartered financial planner Aj Somal says: “If firms are branding themselves as chartered then customers should be able to speak to a chartered planner. These strengthened requirements should have been in place from the beginning.”
Informed Choice managing director Martin Bamford says: “I know some firms which masquerade as chartered but only a minority of their advisers are chartered.
“Firms are being given plenty of notice of these changes and it will be no great loss if some decide to drop the label.”
Pearson Jones investment director Peter Heckingbottom says: “As more advisers become chartered, it is important to ensure that only the very best firms can achieve corporate chartered status.”
Playing catch up
But others say the requirements still lag behind the Institute of Financial Planning’s accredited firm status.
To become accredited, at least half of a firm’s regulated individuals must be qualified to level 6. Firms are also individually assessed to check whether they are delivering high standards of financial planning.
IFP chief executive Steve Gazzard says: “Our focus is on the service provided by the firm as a whole. The criteria is tough but that is right if you are going to hold up a standard to customers as the best.”
Mazars Financial Planning research and development manager Mark Brownridge, whose firm is chartered and accredited, says: “The CII’s standards are qualifications led, whereas the IFP’s focus is on the proposition to clients.
“We have 13 advisers, about 70 per cent of whom are chartered, so if anything the CII is catching up with what we are doing already.”
Accredited firm Forty Two Wealth Management partner Alan Dick says: “The CII’s previous requirements were a joke. The only benchmark that truly assesses whether there is a financial planning culture in a firm is accredited.
“The IFP is looking for a consistent approach across the firm and looks at a real financial plan. It feels like the IFP has set the standard and the CII is trying to play catch up.”
Nonetheless, chartered firms significantly outnumber accredited firms, and many believe the chartered brand resonates more with consumers.
There are 4,500 chartered individuals, of which 3,500 are advisers with a statement of professional standing, and 630 chartered firms.
The IFP has 1,010 practising certified advisers, and 70 accredited firms.
Gazzard says: “We accept that the CII is the default choice for many people and that consumers intuitively recognise chartered as a higher standard. But advisers tell us that becoming certified makes them a better planner and leads to an increase in client satisfaction.”
Brownridge says: “The word chartered is easier for consumers to understand, but when you explain what accredited means and the process involved, they realise its value.”
Others say that as increasing numbers of advisers attain higher qualifications, the industry must ensure the pace of change is manageable and does not leave consumers priced out.
Towry head of private client Andy Cowan says: “The industry has moved on massively in the last three years, and while it is right that we continue to evolve towards level 6, we need to be cautious about the pace of change.
“Advisers need to be able to fit exams around a busy work schedule and if you force people to take exams too quickly they are likely to fail.”
Towry has 170 advisers, of which around 60 per cent are chartered. Cowan says the firm expects all of its advisers to be working towards level 6.
Last week, Succession Group announced it is requiring all of the 60 financial planners in its wealth management business to become level 6 qualified in the next 24 months, and has committed £50,000 towards their training.
The firm has worked with the IFP to develop a support programme, and the professional body says it has had similar requests from other firms.
Gazzard says: “I have seen real movement in the last few months from firms who say getting advisers to level 6 has been on their to do list and they now have the resource to make it happen.”
But others warn the increasing move towards level 6 risks making advice too expensive.
Apfa director general Chris Hannant says: “We would not be supportive of any regulatory requirement to increase the standard to level 6. Getting to level 4 was a big change for the industry and led to a 20 per cent drop in the number of advisers. It is for firms to decide what is right for them.”
BBC Radio 4 Money Box presenter Paul Lewis says: “It is good that more and more advisers are achieving higher qualifications. The higher the barrier to entry, the less likely the charlatans will make the effort.
“But at the same time it puts up costs and that could exclude even more people from advice. The industry must ensure that it serves those with smaller amounts of money without compromising on quality.”
CII vs IFP on the qualifications gold standard
Steve Jenkins: Time is right to strengthen chartered standards
The corporate chartered financial planner title is becoming more popular and that means we have a responsibility to ensure it is fit for purpose.
There are 630 chartered firms, and an increasing number are larger practices. Now it has real critical mass, the time is right for us to make sure it bears scrutiny and delivers what the customer expects: a premium service which goes over and above the regulatory minimum.
Customers expect that when they engage with a chartered firm, they will not have to look hard to find a chartered planner.
For small firms, the vast majority are already meeting the new requirements, but for some of the larger firms it will be a challenge. We are already in discussions with those firms on how we can support them.
These changes should not be easy but they should be realistic and we want to help firms get there.
We are also strengthening the requirements around culture and conduct. We are putting a greater focus on development and training, and firms must commit to aspire to exceed the minimum regulatory standards.
Many chartered firms will be doing these things already, but this will encourage smaller firms who might be doing it implicitly to give it greater prominence.
Part of our motivation to make these changes is a challenge from chartered firms about what are we doing to protect the brand. The chartered brand is only as strong as the weakest member and we want to ensure it continues to be a mark of prestige.
Steve Jenkins is director of financial services and insurance markets at the Chartered Insurance Institute
Steve Gazzard: Accredited status ensures service is up to scratch
Historically, being a chartered firm meant you had one chartered professional and all other staff were members of the CII, which does not mean much in terms of the standards and qualities of the firm.
It has got to be about more than one person’s qualifications and what is vastly more important is that the firm’s service is up to scratch.
To become an accredited firm under the IFP, at least 50 per cent of the organisation’s regulated individuals must be qualified to level 6, and one adviser needs to be a CFP professional. We have had conversations about increasing that requirement further.
We also carry out a number of checks to assess whether the firm is delivering full financial planning as a default service.
We review all of the documentation the firm uses, and look at things like investment philosophy, the percentage of clients who are receiving cash flow planning and the number of paraplanners.
Our criteria is tough but we believe that is right if you are going to hold up a standard to customers as the best.
The number of people taking the principles of financial planning exam has doubled from 100 in 2013 to 200 in 2014, and there has been an increase in interest in both the certified qualification and firm accreditation in the last few months.
We have been gearing up for an increase in numbers for the last three years and it looks like the numbers are now coming through.
Steve Gazzard is chief executive of the Institute of Financial Planning