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Do exams really demonstrate an ability to offer good financial advice?

Do exams really demonstrate an ability to offer good financial advice? The majority of the advisers I know or have spoken with during my many years in the industry do appreciate the need for qualifications, but also suffer great difficulty in attaining them.

There are those who are good at exams and can pass easily, but never actually seem to be able to recall any of the underlying material. There are the other extreme – individuals who live and breathe the topic, but just cannot get it on paper in the way that suits the marking scheme. In real life, how many of us actually remember the intricacy of the rules, and indeed is it safe to do so when they change frequently.

If we are not certain we seek additional information or clarification or discuss it with a colleague.

The statistics tell us that the average age of financial advisers is now 54 and in how many other industries would experienced individuals be required to go back to school and confirm they know what they are required to know in such a false and unrealistic situation?

Would a more work-based less exam focused system be better? It might suit some individuals who have real difficulty with exams and is the way our standard GCSE and A-Levels have been altered to include coursework in the last few years. There was a move to enable individuals to earn 10 per cent of the pass mark under certain of the old Chartered Insurance Institute advanced papers and I suspect, in time it will be introduced again.

The FSA, as our regulator, needs a quantitative measure to assess us alongside the qualitative ones, which is where qualifications become important. Last time it moved the minimum requirement up to the Financial Planning Certificate, which has now been replaced by the Certificate in Financial Planning. Many of us thought then that further examination requirements would follow. It looks like the retail distribution review is to be the vehicle by which this minimum qualification requirement is increased to the Diploma in Financial Planning, as offered by the Chartered Insurance Institute. No doubt alternatives such as qualifications on offer from the Institute of Financial Services, which is the financial services arm of the Chartered Institute of Bankers, will be allowable and the news is they are developing an alternative.

The idea of minimum qualification standards for certain specific types of businesses was pioneered by our current regulator’s predecessor the Personal Investment Authority. The Personal Investment Authority introduced the need for G60, which was the pensions qualification on offer from the Chartered Insurance Institute at that time, or “equivalent” to advise on pension transfers.

There are many who feel, in a cynical mood, that the FSA and Chartered Insurance Institute are “too close” and the qualification requirement is purely a money making business for the institute. Few understand why the cost of exams, material and training is so very high. Part of this is marketing, administration and publication costs and a lot of the remainder is down to the need to resource industry people with the right qualifications to do the exam writing, marking and associated administration.

The other question frequently raised is “why do the results take so long” and the companion query “why cannot the exams be available more frequently” is not far behind it. The Chartered Insurance Institute is introducing a third set of diploma exams from July 2009, which is good news for those taking exams. The institutes recruit people to assist with question writing, marking and associated training on a contract basis. Having undertaken these roles in the past, I would confirm they are a valuable experience, enjoyable and indeed extremely educating.

However, they entail dedication and an ability to set other work aside to meet the tight deadlines, which enables the Chartered Insurance Institute to undertake all the reviews required and release the results as soon as they do.

The real difficulty underpinning all this is the fragmented nature of our industry. The credit crunch may be the talk of the political scene, as though it is new, but many smaller firms have been struggling due to the increasing costs of compliance, the need to maintain up to date software and indeed the changing requirements to name but a few factors for quite some time now. Will the need to take time out of the working day and also pay fees force them to reconsider their position?

Within the large advisory firms and what is left of the old direct salesforces, the support is there for qualifications and training. Many of the networks, to use a generic term for them, are launching major support for the push to upgrade qualifications. The providers, mainly the insurance companies, who supported us through it last time, are back out there offering training, much of which is ostensibly free.

The numerous training firms are gearing up their offerings and preparing for the onset of the rush. The Personal Finance Society has taken time to review the offerings of its two predecessors and alter them to suit the current market place. The regional meetings are easily accessible even to non members and offer the chance to meet with others of like mind, which is possibly even more relevant than the technical content to many.

Many people left it right until the last minute last time and so have started to make the preparations. Others are just far too busy trying to keep on top of the day to day business to have even started to give it a thought, other than the odd panic attack. What are you going to do?

For many, this will be the last straw and they will make the oft considered decision to retire. There are many firms gearing up to help with that; either networks offering buy outs or firms assisting with valuing and selling. How will this affect the industry? Is it last one out turn off the light, or is new blood arriving?

There is a Financial Services Degree, which has been available for many years, but where are the graduate trainee jobs? Again, the fact that many advisers are running small even, one adviser firms, means they cannot easily support trainees and if they want to, cannot really find any help with formulating an apprenticeship. For these smaller firms, training is a non-essential and one of the items to go when times are tight.

I personally am fully behind the need to evidence our ability and it has to be said that the exams are only used as part of that. Advisers are also under strict requirements to record Continuing Professional Development and testing of knowledge and skills is essential for their ongoing ability to trade.

Heather Dunne is a pensions consultant and managing director of HDC