RegulationMar 8 2012

Aspiring professionals

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Unless you are a financial adviser who has just returned from a five-year overseas sabbatical, you will know that the minimum qualification standard for the profession is QCF level four from the end of 2012, and that you will also have to complete and have verified any gap-fill required as well as have attained a statement of professional standing.

The reasons for this have been outlined extensively by the FSA – that independent advice should be genuinely independent and meet investors’ needs, to give clear consumer understanding of what they are being offered, to remove commission bias from the system and provide clarity on the cost of advice upfront, to be delivered by advisers qualified to a higher level.

But for many advisers the minimum qualification standard is only the beginning of a pathway to even greater recognition for their expertise, namely chartered financial planner status – or QCF level six. At present there are just fewer than 3000 chartered financial planners with more than 5000 individuals having achieved further diploma or advanced diploma exam credits since completing their diploma qualification – a clear start in moving from level four to level six with the Chartered Insurance Institute.

Many advisers who were already at level four and enjoying that element of differentiation pre-retail distribution review have decided they wish to keep progressing their level of professionalism. For them the benchmark entry level just is not enough. Others who were sceptical initially about having to prove their technical ability through exams are now settled into a routine of studying and continuing professional development and are continuing along that road. So why stop now?

But after already reaching a newer, higher standard of qualification to be RDR-compliant, is continuing to study a desirable route for the busy adviser?

Where QCF level four, although consumer-focused, is not (yet) widely understood by the general public, chartered status is seen broadly as a ‘kitemark’ for people seeking high-quality advice.

CII research has revealed that the public ranks chartered status number one in terms of confidence in professionalism, with 77 per cent of consumers recognising the chartered title for people giving financial advice, and 68 per cent of consumers who received professional financial advice in the two years prior to the research trusted the chartered title even more.

Knowledge

The original RDR proposal was to have level six as the minimum requirement for advisers – in other words, holding the advanced diploma in financial planning and qualifying for chartered financial planner status. However, following comprehensive consultation with the profession, level four is the agreed minimum standard for all advisers and a real stepping stone towards chartered recognition. The principal difference between the two levels is that level four, the new adviser entry level qualification, is about learning and demonstrating technical knowledge through a number of technical exam modules (R01 to R05) plus a single application paper (R06), where level six is more focused on the application of that knowledge with all the papers at this level representing the planning process.

There is a structured framework of qualifications enabling advisers to gain the CII credits necessary to achieve chartered status. However your experience of moving through the framework will depend on where you are now in your financial advisory career.

For new advisers using the CII to gain their qualification, any new entrant to the market who does not hold existing financial advice qualifications or exams needs to complete the diploma in regulated financial planning, a fully RDR-compliant QCF-approved level four qualification. The six units required, R01 to R06, cover financial services regulation and ethics, investment principles and risk, personal taxation, pensions and retirement planning, financial protection and financial planning practice.

Succeeding with this new qualification earns the new adviser 100 credits and provides a platform on which to build by working towards the advanced diploma in financial planning and, ultimately, chartered financial planner status.

The existing adviser qualified to level four will most likely have the diploma in financial planning, reached through gaining a minimum of 140 credits. The diploma is what the FSA has termed a “transitional qualification”.

This means that holders will satisfy the RDR qualification requirements with any shortfall between the coverage of this qualification and the RDR exam standards to be met through gap-fill activity. The practising financial adviser, similar to the new entrant to the profession, can continue to work towards chartered financial planner status using the matrix of exam modules available to them in order to reach the required number of credits.

Points

To gain the requisite total of 290 credits needed to obtain the advanced diploma in financial planning, advisers need to attain a minimum of 120 credits at advanced level (all modules at this level have 30 credits allocated to them), including a pass in the compulsory unit (AF5) financial planning process. Other advanced level topics include personal tax and trust planning, pension planning, investment planning, investment principles and risk plus a new module which will be launched in the summer of 2012, namely (AF6) senior management and supervision.

With a minimum of 120 credits and a maximum of 180 credits available from the advanced units, the adviser can accumulate any outstanding credits from units elsewhere on the examination framework. When selecting which units to follow, it is important to consider the best route for you to get to level six. This will depend on a number of things – your particular specialism, your advisory business model and the typical type of client who receives your advice.

When it comes to taking the exams for the advanced diploma in financial planning (AF subjects), the format is written examinations. This differs from a number of units available for the new diploma in regulated financial planning that offer multiple choice answer examinations for five of the six modules needed. Existing advisers who have progressed through the diploma in financial planning route will be more familiar with the written exam approach, having experienced it using the J0 or legacy exam modules, for example the G units, to qualify.

Understanding what is expected in an advanced paper and the importance of adopting the obvious tactic of reviewing level-six past papers cannot be stressed enough. In the area of application and exam technique, it is crucial to remember that success at level six is dependent on how well you can apply the technical knowledge gained at level four. Something to consider – especially for new entrants – is doing the planning papers at level six at the same time as doing the technical papers at level four. The case study approach of the advanced level exams is based on scenarios devised by practising advisers and is, therefore, a true reflection of what is required in the financial planning arena. Having reached 290 exam credits, you are now eligible to be considered for chartered financial planner status.

In addition to the qualifications, you need to have five years of relevant industry experience (not necessarily post-qualification), adhere to the CII’s code of ethics and demonstrate three years of existing CPD and commit to maintaining this activity.

Chartered status – now increasingly recognised by consumers, both by individuals and businesses, as a mark of professionalism – highlights how important professionalism is in an ever-changing and competitive market. It also helps the financial advice sector stake a claim on the same ground occupied by other professions, such as accountancy and law, while distinguishing holders from their competitors and peers.

Chartered status denotes a holistic, broad-based financial planner whose commitment to ongoing learning and in achieving the highest technical and planning standards is focused on offering an enhanced service to clients.

Steve Aspinall is director of corporate development for the Chartered Insurance Institute