The number of specialist and higher level qualifications has proliferated in recent years.
While this may have been a boon for the professionalism of the advice community, the drive towards qualifications success has come with its own costs.
Advisers are more qualified than ever, but has this drive towards passing exams had some unintended consequences? Should the prominence of qualifications give way to a US-style fiduciary standard?
One of the principal outcomes of the retail distribution review (RDR) was to increase the level of qualification necessary to become an adviser from level 3 to level 4.
This has acted as a catalyst for many advisers to bolster their professional qualifications up to level 6 (and beyond) with the likes of the Chartered Insurance Institute’s (CII) chartered financial planner route.
Senior technical consultant at EQ Investors, Dan Atkinson, recently achieved chartered financial planner status. He said: ‘It’s really good that we now have advisers who are extremely technically competent and knowledgeable, and who can demonstrate they have the education.
‘It seems odd that before RDR you had IFAs with level 3 certificates acting on quite complicated areas.’
While not compulsory, a new module, RO8, was introduced into the CII’s other, more flexible level 4 qualification, the Diploma in Financial Planning, in the wake of the pension freedoms.
At the end of 2011, the CII launched two level 4 qualifications in paraplanning and discretionary investment management respectively.
Casting the net wide
Anecdotal evidence suggests advisers are increasingly turning to the likes of The Society of Trust and Estate Practitioners (STEP) and CFA UK’s investment management certificate for further exams. Long-term care qualification CF8, could also be added to that list.
‘People are looking in general at those guys and the knowledge they can demonstrate,’ Atkinson (pictured above) said. ‘Most clients aren’t too clear as to what STEP is, but it does give you a lot of authenticity, you can deal with all of their needs.’
CII director of financial services and insurance markets Steve Jenkins said: ‘We are seeing a significant upturn in advisers going above and beyond what the retail distribution review required, not because the regulator says it’s the right thing to do, but because it benefits their business and strengthens relationships with clients.
‘The fact that more and more people are pushing themselves to that level is a good thing, it doesn’t diminish it in any way. It’s positioning the profession where it firmly belongs.’
Real world preparation
Late last year the CII launched a new qualification to extend a baseline level of professionalism to life and pensions company staff too, but has not ruled out expanding this from level 2 all the way up to a chartered life and pensions qualification.
Since before the RDR, advisers have questioned whether qualifications really prepared IFAs for real-world encounters with clients, or left them better placed to deliver a good service.
The CII’s qualifications are regulated by the Office of Qualifications and Examinations Regulation (Ofqual), and as well as passing an advanced diploma in financial planning exam, the chartered designation also commits advisers to an ethical code and continuing professional development standards.
However, some do not feel this goes far enough.
Michelle Hoskin (pictured above), founder of Standards International, said the content of qualifications must keep pace with the increasing expectations of clients.
‘There’s a real shift,’ said Hoskin. ‘Clients are coming to expect five-star service that is second to none. Qualifications alone don’t do that.
‘The market definitely changed after the RDR, there is absolutely no question. But what I love to see is there is more focus on running an amazing business rather than just being amazingly qualified.
‘It is time for advisers to step outside of qualifications and focus on other skills, such as business management, coaching, mentoring, marketing, human resources.
‘If advisers want to have super successful businesses they are going to need to develop these skills or bring people in to do them.’
Not far enough
Norfolk-based Signpost Financial Planning director Nigel McTear believes the current levels of qualification do not go far enough, and that introducing a so-called fiduciary responsibility towards clients, a legalistic relationship of trust involving a formal duty of care to clients, as exists in the US, is the best way to ensure advice is given in a truly professional way. The fiduciary standard is tougher than suitability in the US and focuses on the ongoing component of advice.
‘The increase in the level of professionalism hasn’t particularly been driven by qualifications,’ McTear said.
‘The bigger thing is whether the FCA goes down the route the US has gone down, creating a fiduciary standard of advice. At the moment suitability is our benchmark, but my personal feeling is suitability is a complete cop out. I really think the hallmark of professionalism would be a fiduciary standard.
‘It just doesn’t follow that the qualification itself grounds everything. The qualification itself is nothing to do with product research or investment processes; the things that are really going to make a difference to a client don’t really get picked up by it.’
There have been fears too that the increase in qualification requirements has acted as a barrier to young advisers entering the profession.
The cost on businesses of additional qualification is not just the exams, the materials and training days, but also the study time and time away from the business required.
According to a CII spokeswoman, over a two to three-year period to go from scratch to build up to level 4 would cost an average of between £1,000 and £1,500, but would depend on what supplies and additional materials the learner required.
To buy the ‘blended learning and exam package’, which includes study texts and online study support, as well as exam entry for each unit in the CII’s level 4 Diploma in Regulated Financial Planning, alone would cost £1,392.
Some young advisers have complained at the cost of being put through even basic qualifications to get to level 4.
However, eVestor advisory services director Rohan Sivajoti, who is in the process of recruiting a number of trainees for the online advice firm, said cost was often an ‘excuse’ made by IFAs to avoid taking on new recruits.
‘I’ve never really understood it,’ he said. ‘With eVestor taking on a few people and putting them through the Institute of Financial Services [IFS] route to becoming chartered, the all in cost is around £695. That is not onerous. It’s a bit of an excuse for firms who are a bit scared of training someone up.’
Sivajoti, who has attained the chartered designation through the IFS, prefers that route to the CII because it is less exam focused, includes coursework and real fact-finding exercises.
The IFS reinforces its qualifications with regular reporting sessions from trainees to their training firm to ensure they have absorbed the required knowledge, and in terms of time, the qualifications can be studied in sections with only a few days study leave required before final exams.
Whatever the cost, it will be worth it if clients take chartered status into account when picking an advice firm.
Atkinson said: ‘If you start measuring yourself across other professions and what people are expected to have, most clients would want people to have the chartered designation.’
However, Hoskin is less convinced: ‘Advisers will always say that clients don’t rock up to an adviser’s office and say “let me see your certificates”, but they will expect a service that is absolutely unbelievable.
‘They are not just comparing the firm to the adviser they dealt with 20 years ago or the one they disengaged with recently, they are comparing the adviser with the five-star restaurant or first-class flight they just had.’
Sivajoti (pictured above) agrees. ‘Clients don’t care [about chartered],’ he said. ‘It’s all about the implicit trust in you rather than the qualification.
‘I barely mention the fact that I’m chartered, but I’m sure in years and years to come it will be the new benchmark, so it’s best to future-proof yourself.’
Any increase in the number of qualifications gained may simply reflect demand for greater expertise in more niche areas.
If there is one piece of consensus, though, it is that not all chartered planners are the same, and an exceptional level of professionalism is not magically achieved the second an exam is passed.