In the second of its RDR Issue Papers, focusing on market segmentation, Aifa highlights the fact that Mifid does not stipulate the need for mandatory qualifications.
It says the current minimum benchmark qualifications in the FSA’s new T&C sourcebook are justified as a supervisory tool.
“How would the EC view mandatory higher qualifications in the UK and if imposed, would they create an anti-competitive market for UK advisers?” The paper says.
The paper also asks whether talk of a future “28th Regime” for financial services regulation across Europe could be the primary advice of the future.
It questions how the “sub-optimal” outcomes of primary advice would sit next the Newcob/Mifid suitability requirements that come into effect across Europe from November.
The FSA is hoping that its plans for primary advice will fall outside Mifid, as the current basic advice regime does.
Aifa’s analysis paper supports the FSA’s calls for raising professional standards but says the focus should not just be on higher professional qualifications.
Aifa says it is not convinced the current segmentation proposed by the FSA is being correctly labelled and is worried that primary advice could pose a risk to consumers.
“We don’t want a half way house where consumers are partially advised,” says the paper.
It questions whether the word “professional” is appropriate in the context of segmentation as it could send out the wrong message about the other segments of advice.
The paper also asks how incentives for firms to adopt to certain business models through regulatory dividends would apply to a firm with a mixture of advisers.
It says the current proposals do not recognise the gap in standards between the Certified Financial Planner and Chartered Financial Planner status.
It says: “Both are credible and worthy designations but there would need to be clarity over the minimum qualifications required for PFPs and whether membership of a professional body would be mandatory. “
Aifa deputy director general Fay Goddard says: “We want to ensure that the outcome of the Review delivers a better, and not just a different, regime that has clear benefits to consumers and delivers a robust advisory sector. We urge members to get involved and send us their views.”