Backbench MPs have called on the Financial Services Authority (FSA) to reconsider its stance on adviser qualifications and allow grandfathering, in a House of Commons debate on the retail distribution review (RDR).
MPs from across all parties criticised the cost benefits of the RDR and the impact qualifications may have on adviser numbers and access to advice.
Around 80 MPs attended the debate and repeatedly questioned financial secretary to the Treasury Mark Hoban over the impact of the RDR and the regulator's accountability.
Mark Garnier (pictured), Conservative MP for Wyre Forest, who with Conservative MP for West Worcestershire Harriett Baldwin proposed the debate, said the RDR’s level four qualifications requirement did not take into account experience and placed too many time and cost demands on advisers.
‘RDR is requiring all financial advisers to attain the QCF level four pass and in the broadest sense that is not unreasonable,’ he said. ‘However, what it does not take into account is there are a great many IFAs who have a wealth of experience but with an average age of 47 little enthusiasm to start taking new exams.
‘It is estimated that these exams will require one hundred hours of study for each of them; this for an individual who needs to earn a living and may be working by himself in a rural community,' he added. ‘I can see no reason at all for not introducing grandfathering rights and indeed when the FSA was set up they introduced grandfathering rights when IFAs came over from the Personal Investment Authority.’
Garnier’s appeal for grandfathering was backed by Conservative MP for South Derbyshire Heather Wheeler and Conservative MP for Aberconwy Guto Bebb.
Baldwin (pictured) argued the new qualification requirements would not stop mis-selling.
‘If I thought passing an exam would prevent mis-selling and we would never have any more mis-selling in the future I would be more supportive of this idea, but ..an ability to pass an exam…doesn’t seem to me to preclude mis-selling in the future,' she said.
Further criticism of the FSA's qualification requirements focused on the lack of availability of exam slots and a failure to accommodate specialist advisers.
Around 30 MPs spoke or asked questions during the debate, with many focusing on the RDR’s impact on adviser numbers. Labour MP for Middlesbrough South and East Cleveland Tom Blenkinsop, Labour MP for Strangford Jim Shannon and Tessa Mint, Conservative MP for Wells, all highlighted the RDR's potential impact on rural communities.
Others argued a drop in numbers would play into the hands of banks which were responsible for far more complaints than IFAs.
Bankbench MPs said the FSA was too soft on banks while too harsh on IFAs, and argued the regulator needed to be held more accountable, with some suggesting adviser charging rather than commission would further restrict access to advice, making independent financial advice the preserve of the rich.
Hoban (pictured) spoke towards the end of the debate although he took no questions. He gave no ground to the MPs, defending the RDR's stance on grandfathering and qualifications.
‘Consumers must have confidence IFAs are fully up to date and their advice is underlined by good technical knowledge; there can be few honourable members who do not recognise this,’ he said.
‘I recognise the points that have made about grandfathering and it’s a very important debate to be had but we need to think about how much experience do we think is sufficient for people to be grandfathered and do we ensure this experience covers the range of products necessary to provide whole-of-market independent advice.’
‘We are asking people to advise on a range of products, pensions, bonds, ISAs, and I think consumers are entitled to know their advisers have a high standard of technical knowledge and the minimum qualification standard should deliver that.’
He said the FSA took difficult decisions on behalf of parliament and consumers. He defended its position on adviser qualifications saying higher qualifications would lead to better outcomes and that around 50% of the profession had already reached the level four qualification standard, with 89% already meeting the required hours for continuing professional development.