The Financial Services Skills Council (Fssc) has published national occupational standards for providers of generic financial advice, as part of the Fsa's national strategy for financial capability.
The standards define the boundaries for generic financial advice as a standalone service and establish a set of core skills and competences for those who engage in this activity, whether in the private or not for profit sectors.
The Fssc describes generic financial advice as covering everything from giving very general information, such as how to open a bank account, to advice on how someone could allocate the distribution of their investments.
It differs from retail financial advice as no specific product recommendations are made and consumers are not being sold products and services.
Even where the organisation can provide specific products which may meet the consumer’s needs, the standards state the adviser must make the consumer aware they are under no obligation to buy products from the organisation and they may go elsewhere.
The standards contain units on:
- Engaging with the consumer: establishing reasons for seeking generic financial advice;
- Establishing the consumer’s key financial concerns and gathering relevant information;
- Identifying and agreeing priorities and options for the consumer to enable informed financial choices;
- Identifying ways of meeting financial needs for the consumer to consider; and
- Referring the consumer to further financial information or advice.
More specifically, generic financial advisers need to have a broad knowledge about budgeting, debt and borrowing, savings and investments, and protection products, but where a consumer needs personalised advice the adviser will be expected to assist the consumer by referring them to a specialised adviser.
When gathering information about the consumer’s key financial concerns, the adviser must:
- Encourage the consumer to express the nature of their financial concerns and establish if the advice is for them or a third party;
- Discuss with the consumer their issues and concerns, their financial circumstances and help them identify what provision they may currently have;
- Ascertain whether the consumer anticipates any changes in the foreseeable future which may affect the area of advice concerns;
- Explain to the consumer your advice is based solely on the information they have been able to provide for you;
- Check the consumer understands their current financial circumstances and what areas need to be addressed; and
- Agree with the consumer if any immediate action is required and what it will be.
When identifying options for the consumer, the options presented must reflect the consumer’s own aspirations and goals rather than presenting the consumer with options the adviser thinks are appropriate for the consumer’s circumstances.
The general knowledge required by an adviser includes:
- Understand what is meant by generic financial advice and the rules which currently apply to the different types of advice;
- Demonstrate knowledge of the principles of business ethics and integrity as set by relevant financial codes of conduct;
- Understand the major life stages/events which can affect finances;
- Understand the importance of the ownership of assets in improving financial prospects throughout life;
- Understand and explain the basic principles of taxation;
- Know the main types of financial services options and solutions available and how they are paid for;
- Know the key organisations and consumer protection bodies and the roles they play within the provision of financial services;
- Be aware of relevant regulations and legislation applying to generic financial advice;
- Be able to recognise potential areas of benefits and/or tax credits which might apply to the consumer, the conditions applying to them and where to refer the consumer to obtain further information; and
- Know how to collect, record and interpret the information given so you can explain things clearly to the consumer including what the consumer has to do next.
Lucy Courtenay, Fssc standards and accreditation director, says: “The standards will reassure consumers that they are receiving a common level of service and are not being sold products and services, as well as preventing those providers who are not authorised to give regulated investment advice from doing so inadvertently.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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