From Special Report:
The mark of the true professional
Part of the FSA’s risk-based supervision, statements of professional standing should be considered by IFAs
Statements of professional standing (SPS) may be seen by some advisers as yet another imposition from the regulator. Or could it actually be an opportunity to demonstrate quality that actually helps business and boosts consumer confidence?
This element of FSA’s comprehensive and landscape-changing retail distribution review could seem innocuous or even a bit pedantic – but could equally assist advisers to build their business. It would be a pity if mis-understandings weaken the potential upside of statements of professional standing.
What are these requirements and what do advisers have to do? The basic principle is that advisers giving investment advice to retail customers will have to demonstrate under the RDR that they are adhering to the enhanced professional standards of qualifications, continuing professional development and ethics.
This is primarily to build consumer trust and confidence, to increase individual regulatory accountability and to focus advisers’ attention on the importance of competence and ethical behaviour. In one sense the SPS is aimed at “empowering” advisers to make the most of their professional standards and to deepen ownership of those professional principles.
In practice, advisers will need to obtain an SPS from the most appropriate accredited professional body (a list is published by FSA). The statement confirms that your qualifications have been verified (by an approved accreditation body) and that you have signed an annual declaration that you:
* Hold the required qualifications (including gap-filling).
* Have kept your knowledge up-to-date.
* Adhere to standards of ethical behaviour.
The SPS also includes your individual reference number as on the FSA Register and a “recommendation” that the reader should also double check that you are on the FSA Register, and explains how to do so.
An SPS will be needed to be obtained from one of the FSA approved accreditation bodies (largely professional institutes). For the first time round, firms will need to provide evidence to an accredited body that each competent retail investment adviser has completed their appropriate qualification, including all gap-fill where required, and the adviser will need to declare that they have complied with the ethics and principles contained in FSA’s approved person’s rules (referred to as APER – check the FSA website for details). If firms have competence and exam issues with any staff they should be notifying FSA now. For example, an adviser who is no longer considered competent or has failed to obtain the relevant exam in the time period set.
This statement will need to be renewed annually and signed, including a demonstration that you have kept your knowledge up-to-date by undertaking any relevant continuing professional education required.
The date by which all affected should hold a SPS is of course 1 January 2013. There is understood to be a grace period of 60 days from 31 December 2012, to cover possible administrative delays but many can and should obtain theirs earlier. The accredited bodies will themselves be checked by the FSA and to ensure that they are monitoring their own systems.
It is important to emphasise that none of this replaces the existing training and competence rules. Advisers have to pass certain exams and do CPD anyway.
The SPS does not remove these requirements nor let the firm “off the hook” from its responsibilities for ensuring that staff are properly trained and assessed. It is an extra layer of check and a new form of demonstrating professionalism, urging the industry to take T&C and ethics seriously. It is not required to show customers or potential clients a copy of your SPS but it likely to be common practice and in the interests of the advisers. Better to offer information than to be considered somewhat reluctant if asked for it. It is the way I can see for many to engage in building their credentials and underlining their standards.
It does change relationships with institutes for better or worse. Membership becomes more meaningful but on the other hand it is expected that these bodies will carry out random CPD sample checks, for example, and will alert FSA to any issues they find in this area. It is interesting if this increases or decreases engagement with institutes, it is likely to be a similar relationship as between accountants and their professional bodies.
This is all part of, in FSA speak, a risk-based supervisory strategy for individuals. Information will be collated on an adviser database from a wide range of sources, including from the feeds of data from the accredited bodies. This should lead to better advice standards all round but signing a declaration does not make any business ethical. The confidence and skill with which the SPS is used may well be a reflection of the underlying values and spirit of the business.
David Jackman is director of The Ethical Space and formerly head of training and competence and business ethics at the FSA