Becoming a financial adviser is not easy. In order to be able to offer financial advice in the UK, individuals are required to meet the qualifications set out under FCA guidelines.
Prior to the RDR, advisers only required a qualification at level 3, equivalent to A-levels. However, the RDR introduced a number of changes and also required financial advisers to be qualified at level 4 or above, equivalent to a certificate of higher education, as shown below.
|Qualifications and equivalents|
|1||GCSE (grades D-G)|
|2||GCSE (Grades A*-C)|
|4||Certificate of higher education|
|5||Certificate of higher education|
|Source: Gov.uk. Copyright: Money Management.|
For advisers, these qualifications matter, since a great part of what they do requires them having adequate knowledge and skill. “Adviser qualifications are as important as ever because what we perform is essentially quite a heavily academic-based role,” says Jaskaran Pawar, a chartered financial planner based in Northampton. “Qualifications breed professionalism in my view. It is less important for the clients themselves perhaps, although I am sure it also helps to instil confidence when a client’s adviser has good qualifications.”
He adds, however, that the variety of qualifications available can hinder more than help. “It would be nice to have just one, but then we work in quite a diverse field so to expect that is arguably unrealistic.”
The FCA requires advisers to hold a Statement of Professional Standing (SPS), issued by one of the accredited bodies listed in Box 1. This statement confirms that advisers have successfully completed a level 4 qualification approved by the FCA. Advisers are also required to complete an annual programme of continuing professional development (CPD) of 35 hours and adhere to the FCA code of practice. This is to be renewed every 12 months.
Many advisers start off shadowing experienced financial advisers, gaining basic training in a range of financial products. This is provided by their employers through masterclasses and on-the-job training. Most employers also pay for examinations, but trainees are expected to study outside working hours. Once an adviser attains the expected level of qualification, employers will maintain a regular level of supervision to ensure they maintain levels of competence and compliance with regulations.
“Financial advice is not straightforward and some of the dependencies are not obvious unless pointed out,” says Jeremy Edwards, an associate partner at Leicestershire-based Martin-Redman Partners. “The drive to more professionalism requires advisers to skill up and clients expect you to be able to assist over quite a wide spectrum. Continuing professional development is possibly more important than the papers taken infrequently during a career, as nothing stays the same and formal exams are always behind the times.”
A recent consultation from the FCA also suggested that IFAs could be subject to additional training or qualification requirements if they are to be involved in the second-hand annuity market, which is set to arrive in April 2017.
RDR and more
RDR introduced a number of changes in the UK retail finance space, including the requirement for financial advisers to obtain an annual SPS and to be qualified at level 4 or higher. As a result a number of advisers decided to quit the industry due to extra studies and exams.