Investment advisers will be required to demonstrate they can understand, interpret and apply their knowledge of the financial regulatory system, as well as investments, retirement planning and protection under proposals for financial advice examination reform.
Details of a consultation launched today by the Financial Services Skills Council – looking at appropriate examinations content for investment and mortgage advice - suggests four exams have been set out which could be taken by investment advisers interested in conducting retail investment advice.
Bulk of the content looks extremely similar to existing FPC 1 and FPC2 exams, albeit the investment, pensions and protection categories are now broken down into separate exams.
That said, it is still not entirely clear just how many exams advisers will have to take to meet existing adviser standards, as the FSSC says it is up to examining bodies to decide how many of the exams intermediaries are required to take in order to meet the current IFA adviser standard.
Appropriate Examination 1(ApEx1) – looking at the UK financial services, regulation and ethics – is very similar in content to the existing FP1 Financial Regulation exam set by the Chartered Insurance Institute, as it requires advisers demonstrate, among other criteria, their knowledge of the financial services regime, the process of giving advice, Conduct of Business Rules, how to deal with complaints and the basic legal requirements relating to giving advice.
There is very little specific information, however, concerning the ethical content of the examinations and requirements on advisers – a new element which former FSSC managing director David Jackman was keen to implement – as the ‘ethical’ element of the exam seems to relate more to existing FSA rules on conduct with clients.
However, this appears to be the exam which deals with all the basic advice-giving requirements on intermediaries, such as approved person status, record-keeping, advertising and financial promotion rules, as well as training and competence requirements and any other specific rules on financial advisers, alongside COB suitability, charges, commission, proposals for simplified advice on the ‘Sandler’ suite of stakeholder products and includes general insurance regulations which will be implemented before the FSSC enacts the new exams regime.
Even though this exam does relate to many of the key skills of financial advisers, the FSSC points out in its main consultation there is to be a separate exam launched later this month – similar to FP3 – which specifically deals with giving face-to-face advice, fact-finding, product selection, and giving investment advice.
Appropriate Examination 2 (ApEx2) specifically deals with investment and risk, and requires intermediaries show their understanding of the various assets classes and product types within the market, UK taxation requirements, risk assessment and how it can be measured by both the advisers and consumer, asset allocation as well as associated tax planning.
Appropriate Examination 3 (ApEx3) looks at protection products and requires advisers show comprehensive knowledge of why financial protection is important in the advice process, how state benefits can affect this protection, the main types of protection products and features – including a new category of ‘personal accident insurance’ - as well as the life assurance and associated trusts which can be used for inheritance tax and estate planning.
Appropriate Examination 4 (ApEx4) deals with the basic principles of retirement planning, the tax treatment of defined benefit and money purchase schemes, the associated rules on contributions, how to select contacts and providers and later draw the client’s DC benefits, rules around pensions and divorce as well as current proposals for Pension Bill reform by the Inland Revenue and the Department for Work and Pensions.
Specific details of each exam are set out in the Indicative content section of the document.
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