The FSA could force advisers to take further qualifications when they are advising on specific non-mainstream products the regulator fears could lead to poor customer outcomes.
There are already qualification requirements in the Training and Competence (TC) sourcebook for specialist advice such as long-term care insurance contracts, pension transfers and equity-release mortgages.
On the same basis, it says where it is concerned certain non-mainstream products could produce poor customer outcomes, it could introduce a new requirement for an appropriate qualification.
This would be in addition to the qualifications needed for mainstream activities such as advising on packaged products.
"The growing sophistication of investments generally, might mean that advisers with only the minimum qualification (such as that for advising on packaged products) should be restricted to advising on more mainstream investments," it says.
Its proposal comes as part of a wide-reaching discussion paper on giving the FSA and its successor the CMPA powers for greater product intervention to help protect consumers.
In the paper, the FSA says the RDR is already increasing qualification standards for all investment advisers to improve competence.
"As we suggested in DP07/01, we consider there is scope for more specialist requirements where an adviser is advising on non-mainstream products. The challenge has been to define non-mainstream products."
This could be teamed with an earlier suggestion in the paper to prevent non-advised sales of certain products, it says.
Such a move would ensure customers are only exposed to advice on complex products by advisers who can demonstrate a higher level of knowledge and skill in that market, the FSA says.
Advisers would prove their specialist knowledge by attaining a relevant additional qualification and carrying out relevant additional continuing professional development.
"We welcome views on which activities we might define as specialisms, to be included in any additional qualifications. We encourage the industry to discuss this with us," the FSA syas in today's paper.
The FSA is also mooting less interventionist ways of steering the market away from product designs about which it has concerns using a series of "early warnings", including by publishing a list products it deems unsuitable for mainstream consumers.
"CFEB's Moneymadeclear pages already highlight high-risk and complex products that should not generally be sold in the retail market.
"We could look to follow this approach and publish a list of products that we regard as being generally unsuitable for the mainstream, retail market," it says.
It says this list might include, for example:
• traded life policy investments;
• some of the more complicated structured products; and
• leveraged Exchange Traded Funds.
The list would not the products, but would make clear the starting point is that these products are unsuitable for most retail customers, the FSA states.
"We would not expect the product to reach the mass market, would not expect it to be marketed widely and would expect extensive research and justification when making it available," it says.
It could also consider further disclosure-based solutions focused on particular products.
One option, like health warnings on cigarette packs, would be to mandate the warnings to be disclosed on products that are of significant concern to the FSA, including the format, font, position and size of those warnings on disclosure documents.
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