Advisers who hold higher minimum qualifications will be more competent and less likely to make mistakes resulting in the recommendation of unsuitable products, the FSA says today.
In its latest RDR paper, the regulator says its package of measures will improve the quality of advice and reduce the incidence of mis-selling.
The FSA today publishes a list of RDR adviser qualifications and consults on whether advisers will also be required to hold a Statement of Professional Standing certificate confirming they are qualified to give advice.
This adds to existing proposals requiring all financial advisers, independent or restricted, to be qualified to at least QCF Level 4 in a relevant qualification.
The FSA says proposals in the RDR will improve the financial advice market for consumers.
In today's paper, it states: "Advisers who hold higher minimum levels of relevant qualifications and who address any gaps in their knowledge through regular CPD will be more competent and less likely to make mistakes that could result in unsuitable products being recommended to their clients."
It adds recent research it has conducted provides evidence linking the effects of qualifications, CPD and ethical requirements with consumer outcomes.
Evidence of positive links were found in a number of cases, it says, but the most relevant case is a review of financial planning advice from Australia.
In 2003, the Australian Securities and Investment Commission (ASIC) conducted a survey to assess the quality of financial planning advice available to consumers.
An extensive mystery shopping exercise was conducted and 124 completed financial plans were collected. These were forwarded to ASIC and were evaluated by an expert panel on 29 criteria, with each plan given a score out of 100.
According to the FSA's research, plans completed by advisers with a ‘certified' status (i.e. qualification as a Certified Practicing Accountant (CPA) or Certified Financial Planner (CFP)) were positively correlated with quality. CPAs are qualified above degree level, have a minimum of three years' industry experience and undertake CPD.
The FSA says CPA-qualified advisers obtained an average score that was seven points higher than advisers with no qualifications, while CFP-qualified advisers obtained an average score that was five points higher than non-qualified advisers. These differences were statistically significant.
"Higher qualifications are correlated with better outcomes for consumers," the FSA concludes.
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