In order to give advice to UK residents in respect of retail investment products, an individual must be approved by the Financial Conduct Authority (FCA).
To be an Approved Person, an IFA needs to meet a number of criteria.
They must be properly qualified. The minimum qualification standard for an investment adviser became QCF Level 4 on 31st December 2012, which is equivalent to the first year of an undergraduate degree.
The individual must also be competent to give investment advice. This competence is measured in a number of different ways.
The individual has to hold a valid Statement of Professional Standing (SPS) from an accredited professional body.
This SPS is renewed annually and demonstrates that the adviser has carried out the relevant amount of continuing professional development, as well as signing up to a code of ethics.
Competence is also managed by the authorised and regulated firm, which must have in place a training and competence plan. The firm must sign off the individual adviser as competent and then monitor their competence.
All Approved Persons have to be ‘fit and proper’.
This is a regulatory requirement designed to ensure the individual is honest, has integrity and is financially sound; all of the qualities you would expect from someone giving you investment advice.
If this process of becoming and maintaining status as an Approved Person sounds quite onerous, that is because it is!
It is challenging to become an Approved Person and also challenging to retain this valuable status, particularly when moving to a new firm.
Whilst some IFA firms can seamlessly manage the transition of an Approved Person from one firm to another, others seem to struggle with this process and leave their advisers ‘inactive’ for many weeks or even months.
The FCA applies a high degree of scrutiny to individuals who are moving firms and have a history of recommending esoteric or high risk investments to cautious investors.
We encourage all investors to periodically check their IFA is an ‘active’ Approved Person by visiting the Financial Services Register.
If they are no longer ‘active’, they are not legally permitted to deliver any regulated advice.
Long periods of inactivity on the Financial Services Register might also prompt you to find out why your IFA has lost this status and been unable to quickly become an Approved Person with their new firm.
