Raising the bar or pushing too far?

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Raising the bar or pushing too far?

The Chartered Institute for Securities and Investment, which has 45,000 members in 111 countries, recently announced that it would be raising its certified financial planner qualification criteria from level six to level seven. In academic terms, this is the equivalent of studying for a masters instead of a bachelor’s degree.

Most UK intermediaries still favour the qualification route offered by one of the CISI’s rivals – the Chartered Insurance Institute. Nonetheless, the move marks the first significant rejig of adviser qualifications since the RDR came into force in 2013. Some exams have been tinkered with, and new ones introduced, but the necessary requirements to reach chartered status have largely remained untouched.

As things stand, the change will have no impact on the minimum qualification standard for intermediaries to give advice, which is currently the level four diploma. But it has reignited the debate as to whether chartered should be set as the minimum standard.

Rob Handford, chartered financial planner at Hunter, Aitkenhead & Walker, feels that many could benefit from such a move.“The level of knowledge needed to pass the advanced diploma papers is no more than that needed to do the job. And when you get complex client scenarios, you are going well past that level in practice,” he says. 

“Studying for the exams really focuses your understanding, improves your application of knowledge, and generally sharpens your mind. I have never sat an exam and not learned something new, even after 30 years.”

In any case, the number of chartered financial planners is rising. Keith Richards, chief executive at the Personal Finance Society, says that more than 6,600 PFS members are chartered, with a further 8,000 at least working their way towards the status. Therefore, he believes that enforcing this as a minimum standard is unnecessary.

“The sector is doing a good job on its own, with many at diploma level also holding advanced qualification units where they have seen it appropriate to enhance the performance of their role,” Mr Richards says.

“Over the past year, there has also been a noticeable increase in new talent [seeing] the sector as a first career of choice. There is little doubt that chartered status has played a key role in changing perception, as it is aligned to other chartered professionals such as accountants and surveyors. Consumers are being well served by the profession at all levels, and many [advisers] already use the diploma as the minimum, rather than maximum level.”

Whether the CII will follow the CISI’s lead and bump up its chartered requirement to level seven is unclear. Mr Richards feels that changes to the CII’s current syllabus are not required.

“The advice profession has continued to voluntarily raise its technical knowledge through a combination of qualifications and relevant CPD,” he says. 

“The combination of the two will arguably negate the need for further regulatory intervention. Regularly reviewing and updating appropriate qualification units is something that we are alert to, but this will be based on the needs of the sector and the public we serve.”

Going for gold-plated

Prior to the RDR, the minimum requirements to become a fully qualified financial adviser were less demanding. One of these, the certificate for financial advisers, consisted of only four modules: UK financial regulation, investment and risks, retirement planning and protection, and assessment of investment advice knowledge. 

In total, only eight hours of exams were required to be sufficiently qualified to – in a nutshell – provide advice on portfolios worth millions of pounds. This meant that anyone moving into an advised role, either fresh out of education or switching careers, could be advising clients within six months.

The route subsequently became significantly tougher. The CII estimates a total of 570 hours of study is needed to reach the 140 credits required to obtain its level four diploma in financial planning.

The advanced diploma, meanwhile, requires an additional 600 hours of study and 290 credits in total, with 120 of these needing to be obtained from level six examination papers. Intermediaries who have achieved this, plus have five years’ industry experience, are eligible to apply for chartered status. This means that anyone looking to embark on a career as a financial planner should not take the task lightly. And although chartered status is not necessary to give advice, more and more are seeing its worth.

Elliot Guthrie, trainee paraplanner at Create and Prosper, is currently undergoing this route, with the aim of becoming a fully fledged financial planner. To date, he has completed a wide range of exams as part of his training, including the diploma in financial planning (R01 to R06), the certificate in discretionary investment management (J10), the tax and legal aspects of business (J03), long-term care insurance (CF8) and group risk (GR1). He is also awaiting results from advanced diploma qualifications: business financial planning (AF2) and investment planning (AF4).

Mr Guthrie says that although advisers should strive to become chartered, making it the minimum standard for all advisers could have wider implications.

He says: “I view getting to chartered as an important goal because I think it is still the ‘gold standard’. However, I don’t think that it should be mandatory as it could further price some clients out of advice. [That said], for advisers conducting certain higher-risk types of business such as defined benefit transfers, it should be mandatory.”

Although chartered status is not currently necessary to advise on DB transfers, an announcement last autumn highlighted concerns about how well equipped intermediaries are to provide advice in this area. 

In light of growing concern over transfers – including the regulator’s own findings from its review of advice suitability – an FCA policy statement said that all pension transfer specialists must hold an additional level four qualification for providing advice on investments by 2020 if they wish to continue conducting DB transfers. This requirement is to ensure that the advisers in question have gained the necessary knowledge to assess transfer suitability, including the underlying investments joining the new scheme.

The regulator says: “We would like pension transfer specialists to hold the new qualification as soon as practically possible, and by no later than October 1 2020. 

“In deciding on the transition period, we are conscious that there needs to be sufficient time allowed for pension transfer specialists to study and take the additional qualification. We consider two years to be a reasonable period in which this can be achieved. In the meantime, firms continue to be responsible for assessing and maintaining the competence of their employees. This requirement will also form part of the Senior Managers and Certification Regime.”

Culture club

But an adviser’s role does not simply boil down to a level four or level six qualification. In truth, most will deem becoming qualified on paper as the easy part; putting into practice the necessary skills to assess clients’ needs and manage their money is what makes and elongates a successful career.

A number of advice firms offer apprenticeship schemes, providing ‘on-the-job’ training for budding advisers, plus supporting them through – and often paying for – qualifications. Restricted advice giants St James’s Place and Quilter are two of note.

Another route is through paraplanning, which has its own qualification. This can help to build familiarity with the job’s back-office administrative duties, as well as gaining an insight into an adviser’s daily role.

In Mr Handford’s view, it is the attitude of the advisers themselves rather than letters after their names that will improve the quality of advice.

He says: “High standards come about mainly from culture. Sure, you also need competency, but in an environment where the desire is to do a great job, there tends to be constant self-improvement anyway. Great advisers tend to be challengers: challenging the client on what their goals and objectives are, challenging the boundaries of their role, challenging their knowledge, and challenging their own and their colleagues’ advice standards.”