Discretionary managers face qualification drive under new FSA requirements

The FSA has underestimated the number of discretionary managers who will be deemed under-qualified by the new training and competency (TC) requirements, according to the Association of Private Client Investment Managers (Apcims).

While the RDR qualification regime affects those advising on investments for retail clients, the FSA's latest consultation paper on Competence and Ethics (CP 10/12) has set out new qualification standards specifically for discretionary managers.

Forming part of this strategy, the consultation paper stated its intentions to revoke the ‘Transitional Provisions for Designated Investment Business’. These provisions, which have been in force since the Financial Services and Markets Act was passed in 2000, enabled individuals to be grandfathered in under a number of conditions.

Under the new TC requirements, grandfathering will no longer be allowed, which will mean that discretionary managers who were formally grandfathered in under the old TC regime and new entrants to the profession will now need to show that they are qualified to a certain level and will have 30 months to complete the appropriate qualification.

The list of compliant qualifications for managing investments includes the Chartered Institute for Securities and Investment’s (CISI) Certificate in Investment Management, the Investment Management Certificate, and the Level 6 Diploma in Wealth Management.

According to the CISI, investment managers who hold the SII Diploma (the regulation and compliance paper and any two other papers) will be covered for the RDR and for managing investments, alongside individuals who have completed the CISI Masters in Wealth Management, which is listed in the regulations as 'Diploma in Wealth management'.

However, the PCIAM qualification is not currently recommended by the FSA as a valid qualification for managing investments. CISI managing director Ruth Martin said she was in talks with the FSA to explore whether there was scope to bring this in line with their standards.

The withdrawal of grandfathering arrangements will affect existing authorised investment managers currently working to comply with the new examination requirements for RDR who provide retail advice alongside discretionary management. The latter will now come under the new examination arrangements proposed in CP10/12. The measures will also affect discretionary managers with no retail clients, according to the CISI.

Apcims has expressed concerns over the FSA’s omission of the PCIAM.

Ian Cornwall, a director at Apcims, explained: 'It is important to note that individual managers who have taken or are taking a ‘no regrets' exam for the RDR, such as PCIAM, may under these proposals have to take a further exam to allow them to undertake discretionary business – PCIAM covers advising on investments not managing investments.'