The Investment Management Association has applauded the FSA for taking on board its recommendation t...
The Investment Management Association has applauded the FSA for taking on board its recommendation that advisers need higher standards of investment knowledge to be fit to give advice on investments.
The FSA is recommending a tougher line on investment knowledge in its Consultation Paper 157 on Exams for Advisers (Examination Framework for Retail Financial Services (Investment Advice Strand 1)), which was released at the SOFA conference in Birmingham today.
"The ability to manage investments is central to personal financial planning, but you used to be able to pass FPC, and so give investment advice to the public, without answering a single question on investment funds," says Victoria Nye, director of training and education at IMA. " We are delighted that this unhealthy situation is being rectified."
IMA helped FSA and the FS NTO host discussion groups with IFA practitioners earlier this year to ascertain the appropriate level of knowledge for 'general practitioner' advisers.
The modules outlined by FSA should focus attention further on where the line should be drawn between core and specialist investment knowledge. The syllabi should be regarded as work in progress and it is vitally important for practising advisers to respond, stating realistically what they need to know in order to give a professional service to clients with savings and investments.
The IMA already runs training courses for advisers who wish to improve their knowledge and skills as investment advisers. It has developed investment case studies for LIA workshops; has helped the Chartered Insurance Institute produce a distance learning programme and is also helping CII to prepare a top-up qualification on investment for FPC qualified advisers.
"We must be practical and make changes which are in the best interests of consumers. There is a fine balance between raising standards and making the profession so exclusive that only a small minority of investors can afford to buy its services," adds Nye.
Nye says further co-operation between the associations, including the Institute of Financial Services, could provide sufficient resources to "top up" the education gap for existing advisers, and create new programmes for advisers entering the investment advice profession.
The IMA is also calling for clear signposting as to the investment expertise of individual advisers, so that it will be easier for prospective clients to find one suitable to their needs.
On the issue of portfolio management, Nye concedes there are many excellent investment advisers, "but we need more who are confident in managing portfolios of funds".
The question of advisers' understanding of investment risk, asset allocation and portfolio management was also raised in the Sandler Report. CP 157 suggests that greater understanding of investment risk is necessary for all advisers, particularly when it concerns investors who have acquired investment products over several years, and whose investments are naturally impacted by volatile markets.
"Do they need specialist investment advice or can the generalist adviser still offer a good service? How much more does the generalist need to learn?" the association asks.
IMA believes the new framework outlined in CP 157 should give greater flexibility to advisers, as well as encourage higher standards and help to establish financial planning as an internationally recognised profession.
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