The world of retail financial services is going through a period of upheaval right now, ahead of the introduction of new regulatory requirements as a result of the Retail Distribution Review (RDR).
The RDR was an initiative from the Financial Services Authority, launched a number of years ago, aimed at fixing some of the problems with retail financial services.
It resulted in several requirements which come into force at the end of 2012.
One of the most challenging requirements for a number of our peers has been the introduction of higher minimum standards for professional qualifications. From 1st January 2013, all financial advisers (whether independent or tied) will need to have a minimum QCF Level 4 qualification, typically a Diploma in Financial Planning.
This is a big step up from the current Certificate level requirement, at QCF Level 3.
An argument that is continuing to roll on in the sector, even though the rules have been decided upon and come into force in a little over two years, is whether these new standards are too stringent.
Some IFAs have been arguing for a reprieve in the form of ‘grandfathering’, where existing experienced financial advisers would not need to pass the new exams and could instead continue advising based on their entry level qualifications and years of experience. They suggest that only new entrants should need the higher level exams.
We have been arguing against the introduction of grandfathering, however unlikely it actually is that the FSA would choose to change their minds at such a late stage.
Informed Choice managing director Martin Bamford wrote an article for Money Marketing magazine this week, where he went head-to-head with financial services veteran Ken Davy. Martin argued against the introduction of grandfathering.
Our argument against grandfathering includes that a set of benchmark qualifications from the 1980s no longer sufficiently demonstrates competence when it comes to the technicalities of advising today.
Things have moved on over the past twenty years. Providing financial advice today requires a very high level of technical knowledge and understanding to cope with the complexities of the options available.
Advisers have had years to get up to speed with the new standards. Those who continue to resist this change, even today with such a short amount of time left, have done their own clients a disservice by risking their own ability to continue as an adviser in 2013.
We look forward to the introduction of professional qualification requirements in 2013 and hope that those of our peers who continue to resist these important changes will eventually be convinced of the benefits for their clients and all consumers of financial services.
Photo courtesy of J Wynia.
