Reforms to the financial advice market come in at the end of next year, and yet there are suggestions to delay by another year. My message to financial advisers? If you can’t meet the deadline, get out of the industry.
Last year I completed the current minimum qualification for financial advisers, the Certificate in Financial Planning.
It has been useful for my job here in the Money Research team at Which?, but it’s equivalent to an A-level – certainly not a good enough qualification for financial advisers giving consumers life-changing advice.
Qualifications give consumers confidence
And that’s one of the core ideas behind the Retail Distribution Review (RDR), which will raise the minimum qualification level for advisers and reform the way they are paid from January 2013. This can only be a good thing. Indeed, the best advisers are already qualified way beyond the new minimum.
Qualifications give confidence to the individual consumer that they are dealing with a professional with proven skills. If I paid a builder to put up an extension for me, I would expect him to hold a recognised qualification and have the right tools to hand. I wouldn’t expect him to turn up with an A-level in woodwork and a bucket of Sticklebricks.
I’m putting my money where my mouth is and am currently taking the new Diploma in Regulated Financial Planning. It’s a QCF Level 4 qualification – broadly equivalent to the first year of a degree and the new minimum under RDR.
What exactly is financial advice?
The early signs aren’t altogether good though. In the study notes from the Chartered Institute of Insurance (CII) there is a section called ‘What is financial advice?’. The answer? ‘Financial advice is when a professional adviser assesses a client’s personal circumstances and recommends financial products that are suitable for them.’
No, it isn’t. Just this one sentence illustrates how some parts of the industry still don’t get it. Financial advice under RDR is no longer about flogging consumers products. It’s about ditching the old sales-driven focus in favour of high-quality advice that’s focused on client needs. Sometimes this involves selling nothing at all.
Financial advisers who cannot meet the new rules by the end of 2012 shouldn’t look for an extension to the implementation of RDR. They should look for a new career.