For the vast majority of IFAs who have been offering sound advice to clients for years, the news from the RDR that a higher standard of adviser qualifications and professionalism is needed will have come as a shock.
The Professionalism Working Group, whose findings were published as part of the review, says the appropriate examination minimum may be Certified Financial Planner for primary level advisers.
For those considered professional financial planners, the PWG expects the minimum accreditation to be the equivalent of of the Chartered Insurance Institute's 'Chartered Financial Planner' or the Institute of Financial Planning's 'Certified Financial Planner." Advisers who lack the necessary qualifications would need to undertake further study to fulfill their target role.
At IFAonline, we received a huge number of comments from disgruntled advisers, angry at the prospect of having to take more exams and the comments of Towry Law CEO Andrew Fisher. He said the three to five year timeframe for IFAs to become more qualified was perfectly achieveable as a degree only took three years to complete.
“I don’t have a problem at all with it being a three year period. Maybe a bigger issue for the industry is that some people aren’t capable of achieving those qualifications, in which case they shouldn’t be dispensing advice,” he comments.
The biggest backlash came from IFAs working in smaller firms who argued they can't take the time out for further study.
Carl Hope Douglas, an IFA at Hope Financial Management, told IFAonline: "Whilst I would love to be able to take the time out and continually study for the next three years to achieve these qualifications I am also trying to run a business and balance this with the fact that I also have a family and a social life.
"I think the majority if not all of the people involved in these discussions have lost touch with the real nature of running a small IFA practice.”
Others were concerned with the timing of the exams and whether qualifications taken in the past (in some cases over a decade ago) would or should be valid.
Paul Yallop, an IFA at Parklands Independent Financial Services, says exam times add to the difficulty of completing a three-year course.
He says: "I recently applied to take the J05 exam; I have to wait until October to take it then if I fail due to a lack of study time I cannot take it for another six months. Maybe these exams would be better sat every three months rather than six monthly. Under the current system taking one exam every six months it would take three years to get AFPC."
Michael Inkley, director of Sanderson Law Pensions Management, adds: "My view is that if exams are required in a given timescale, all previous exam passes should be nullified, and everyone starts with the new framework, based on the current rulebook. That would ensure everyone understands the new regime in every sector of financial planning.
"I am afraid an FCII from 1985 is about as useful at the apex of today's industry, as a World War One fighter aircraft mechanic being put next to an F16 and being asked to service it."
The challenge for the FSA and industry bodies now is to make sure all advisers have reached the standards required but without ruining IFA businesses in the process. What they don't want is for highly competent IFAs with years of experience in the business opting to become primary advisers because they are unable to find the time to take the necessary exams to bump them up to advanced status. They also need look at the qualifications IFAs currently have and work out how they fit into a new framework. Talk of more qualifications for advisers will no doubt increase consumer confidence but at what price to the health of many small firms?
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“Have you done the arithmetic on this for Chartered status and timescale?
“My situation: I have 50 credits from FPC. I could have a further 60 credits from PIC papers (Advanced) if CII accept the certificates and I pay £60.00 for the privilege. I could also have 20 for CEMAP bridge, after diploma stage - total of 130 credits.
“I have been told that I need 290 credits for chartered status.
“Each Advanced paper is 20 credits and I am told by CII that I need 4 more Advanced papers (here you will have to excuse me because I am a bit thick) it takes me about 120-150 hrs of study time for each paper.
“Hours required therefore at the worst are 600. I have a pattern for studying at 2 hours per day 7 days per week before work therefore 300 days required and that is for 80 credits I now have 210 credits
“I now need a further 80 credits and that needs another 6 exams at any level so lets assume 70 hours for each module that is another 420 hours 2 hours per day is 210 days
“Total study time is 510 days and that is without holiday weekends off or anything else or 1.397 years assuming that I pass everything at first hit and the exam dates all fit my study time patterns. I do not think that the timescale is realistic. Do you?
“Please bear in mind that I already have 3 papers of Advanced level G60, G10 and G20. CII will charge me £1.00 per credit for the Bankers equivalent of AFPC to be added. I would appreciate a response. Most people do not.
“This is not a rant but serious thought to a problem that regulators have tried to wriggle away from, ABI want to reduce costs and still offer horrendous levels of commission and the banks want more market share.”
Roger Holloway is an IFA.
"I think the point that we are all missing here is that Andrew Fisher and Towry Law are simply wanting to justify their above average annual management fees with the qualifications that their advisers hold. If Towry Law can charge 1% per annum plus arguably receiving 0.5% trail fees from the funds held within their own in-house fund of funds, they need to justify this somehow.
“If IFA's receive 0.5% trail/renewal fees/commissions but yet Fisher charges double, then who has the last laugh. The value of an IFA business is generally a multiple of ongoing earnings, and is not related to fees or commissions on new business. Therefore I suspect Fisher has the last laugh as his business is worth double that of an IFA with the same funds under management but which only takes 0.5% trail. But guess what, it is Fisher's clients who have inadvertently doubled the value of his business - as long as he retains them.
“Let us not forget that Towry Law is principally owned by Palamon Capital Partners, one of Europe’s leading private equity firms who will not have any reason to worry about how much they charge clients whether fees or commissions as long as they increase the value of the business before selling it."
Simon Evans is aassociate director of Web FS.IFAonline
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