FTAdviser.com

Advertising

As most people in the sector will know by now, the ifs School of Finance is launching a new Diploma for Financial Advisers in the near future.

Why? Two reasons. First and foremost we recognised the growing need to offer a higher level qualification that is not simply about the acquisition of more and more technical knowledge. At present, none of the other awarding bodies offer higher level qualifications that focus on developing the ability to communicate complex information in a manner that can be understood by the consumer. The new qualification will do so.

The second reason for developing this particular qualification is to meet one of the likely objectives of the retail distribution review. The initial RDR question for any adviser or firm to ask themselves is what part of the market do they see themselves operating within as a result of the review. As matters stand, there is a clear choice between full independent advice, which will likely require a level 4 qualification, and tied advice, for which it is proposed that a 'sales' or 'execution only' label will be applied. The feedback of the tied and multi-tied sector will no doubt be reflected in the FSA’s November feedback statement,

For those who are not yet fully committed to moving to a fully independent and customer remunerated model, careful consideration of aspirations and customer profile should be key considerations. The proposals to create a 'money guidance' service are also worthy of close attention as, if the proposals match their stated aims, an increase in individuals seeking regulated sales and advice services could be stimulated.

The interim RDR report, published earlier this year, said: "There is also significant agreement that the QCA Level 4 qualification should apply as the minimum academic qualification for 'advice'."

The Diploma for Financial Advisers will be a QCA Level 4 qualification. To gain the Diploma for Financial Advisers, candidates will have to successfully complete a benchmark Level 3 qualification - the Certificate for Financial Advisers, or an equivalent - plus the Advanced Financial Advice Module.

While there has been some criticism of the amount of time it could take for advisers to reach the likely minimum requirements of the RDR, much of this criticism is based on the false premise that advisers will have to take a qualification that was not designed with either the RDR or testing practical skills in mind, such as the CII Diploma in Financial Planning which takes 400 hours to achieve.

In contrast, the Advanced Financial Advice Module will require about 230 hours of study. While the guided learning hours represent a real commitment from those who decide to take it, it does mean that gaining this Level 4 qualification is realistically achievable within a year.

This rather undermines the argument that there should be a 10 year lead-in time for these requirements to come into force - to enable those nearing retirement an exemption from meeting such minimum requirements - and we hope the FSA takes note.

Importantly, this qualification is not just about improving the status of advisers, although it will inevitably do so, it is about improving outcomes for consumers by helping to achieve greater consumer satisfaction by encouraging a bond of trust between adviser and consumer and, therefore, encouraging repeat business, referrals and the potential widening of services.

The most recent Which? research into standards of financial advice found that more than three- quarters of the advisers it investigated had failed to adequately explain to consumers what the keyfacts documents were. It also found that advisers often made misleading statements and that some failed to complete fact finds to a reasonable standard.

Worryingly, more than a quarter of these advisers failed to establish the customers attitude to risk correctly. The research also found that "One of the key problems was that advisers were not asking enough questions.”

What each of these findings highlights is not that advisers were lacking in technical knowledge but that advisers were failing to communicate effectively. It is like teaching: having a brilliant mind and a wealth of specialist knowledge does not necessarily make for a good teacher. The ability to listen, learn and recognise areas that require further clarification are key as is the ability to take a considered and clearly justified approach to a recommendations.

Advisers need to be able to undertake research, analyse the results and present their findings in an easily understood manner. This practical application will be addressed by the Diploma for Financial Advisers.

On completion of this qualification, candidates will be able to evaluate and analyse complex information regarding clients' financial circumstances, needs and relevant considerations. Candidates will also be able to research and critically evaluate options and formulate recommendations. Perhaps most importantly they will also be able to present and explain their findings in a logical, clear, concise and coherent manner.

Mark Roberts is head of financial regulation for the ifs School of Finance