A qualification conundrum

Sir James Crosby was forced to resign as second in command of the FSA in February 2009 as it emerged that he had no banking qualifications whatsoever, despite being one of the Prime Minister's most trusted financial advisers.

Yet the same organisation that appointed the unqualified Crosby has just raised the bar for giving independent financial advice in the UK. The regulator released an update to its Retail Distribution Review (RDR) in November 2008, setting new standards for IFAs.

Existing advisers must achieve Office of the Qualifications and Examinations Regulator (Ofqual) accredited level four qualifications - also known as diploma level - by December 2012. This is a step up from the previous benchmark of Ofqual level three. Industry newcomers will have to attain level four qualifications starting in 2010.

Despite an Oxford maths degree and over 30 years of experience spent as an actuary, fund manager, and the head of HBOS, Crosby's background would not afford him a single credit toward a level four diploma. But is 'do as I say, not as I do' a valid philosophy for the FSA?

Setting the bar

Ofqual, which recently split from the QCA, is the regulator that accredits regulations, while it is the Financial Services Skills Council (FSSC) that actually develops financial qualifications. Once the FSSC has decided what criteria these will include, Ofqual accredits exam awarding bodies that conform to their standards.

The Chartered Insurance Institute (CII) Diploma in Financial Planning (DipPFS) was the sole way for an IFA to obtain level four status until recently, when an equivalent diploma from the ifs School of Finance was also accredited. To achieve the CII standard, an IFA needs 140 'credits' that can be achieved in a variety of ways. Ofqual has divided these credits into two categories: certificate level and diploma level. At least 80 of an adviser's credits towards the DipPFS must be achieved at diploma level.

IFAs will not have to start from scratch to reach level four, as credits can come from previous learning. For example, each level of the Certificate of Financial Planning (CFP) is worth 70 certificate level credits. The Financial Planning Certificate (FPC) can count for up to 50 credits, depending on whether the qualification was completed before or after 1994. The CeFA counts for 50 to 70 credits, while an Investment Advice Certificate is worth 70 credits. 'Relevant' business courses or university degrees can also add to the credit tally, although this relevance is decided on a case by case basis.

Adding to the confusion is the fact that qualifications beyond the level three benchmark do not necessarily mean advisers have level four status. For example, the CII's Advanced Financial Planning Certificate is above the level three baseline but does not have Ofqual level four recognition.