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RDR CP: Basic advice exempt from QCF level 4 qualifications

Firms offering basic advice will not have to meet the same professional standards as independent financial advisers, although simplified advice processes will have to meet QCF level 4 qualifications, according to the FSA.

The regulator’s Retail Distribution Review consultation paper, published today, states: “We do not intend to apply the proposed professionalism qualification requirements to basic advice.

“This is consistent with our current approach, whereby the higher level competence and ethical requirements in our training and competence rules apply to basic advice, but there is no appropriate examination requirement.”

The FSA has also revealed it is not proposing to apply its adviser charging rules to the basic advice regime claiming the same market failures have not been identified there.

The CP states: “It does not seem proportionate or appropriate to apply adviser charging to basic advice.”

The regulator proposes that firms providing basic advice will need to disclose to their clients that they are providing restricted advice.

But firms offering simplified advice processes will have to meet QCF level 4 qualifications.

The FSA states: “Some firms have asked what professional standards will apply, noting that this is an important cost driver for their business models.

“At this stage, we are of the view that because investment advice is being given, the same professional standards that we propose in Chapter 5 should also apply to simplified advice processes.

“We want to deliver a real change in advisory standards.We are concerned that allowing simplified advice processes to operate at a lower level of professionalism may undermine our attempts to raise standards of professionalism across the industry.

“It could also be confusing for consumers if all advisers were not required to attain the same level of qualifications.”

The report acknowledges potential barriers to implementing simplified advice processes such as uncertainty about how the FSA and the Financial Ombudsman Service would judge the process and the associated risk of liability.

It states: “We will continue to explore with the industry whether and how these barriers might be overcome but we do not intend to create a new regulatory regime for these services.”

The FSA adds that it may consider developing a set of guiding principles that firms would use when designing and implementing simplified advice processes.


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