This week marked the third anniversary since DP07/1, the discussion document which triggered the Retail Distribution Review. It was also marked by the publication of CP10/14, a critical milestone on journey to Retail Distribution Review-Day.
Winners and Losers
Investment advisers now know whether or not their hard earned professional qualification has made it to the final list published by the FSA. There are winners, and there are losers. There are professional qualifications which will allow advisers to continue to practice after the 2012 Retail Distribution Review deadline, and there are others, gained by honest, hardworking examination candidates which will not. There is, however a further round of deliberations still to be completed, in respect of accepted professional qualifications. The FSA will publish a further list in its October Quarterly Consultation Paper, as the regulator is looking to vote in a number of International and European Qualifications, potentially including those already recognised by regulators in other EU and International countries. It is appropriate that we arrive in 2012 having made progress towards a truly uniform approach to Investment Advice Professionalism within what already is a global marketplace.
Support Staff Qualifications
CP10/14 delivers good news to adviser support staff, including paraplanners who can commence or continue professional studies in the knowledge that they need not rush towards the December 2012 deadline, and can carry over into 2013 any relevant exam credits which they have gained in the interim. Previously, the draft rules would have required support staff to start from scratch after December 2012, if in the meantime they had not completed all the Level Four qualification requirements.
Gap Filling and Topping Up
In practical terms, the unfolding clarity is that the majority of existing Investment advisers, including those whose exam qualifications are on the accepted list, are finding that they need to complete a gap filling exercise. They will need to study an average of 16 hours to close the identified technical knowledge and practical application gaps, and evidence that the identified knowledge has been assimilated – through testing, internal or external examination, or through an alternative assessment method.
CPD
Beyond initial attainment of the Level Four requirements, the FSA has published its draft TC Handbook content. For full time Investment advisers, the requirement is to complete a minimum of 35 hours of appropriate CPD within each 12 month period, of which at least 60% (minimum 21 hours each year) should be of structured professional development activities. Structured activities include attending courses, which require attendance for one hour or more, and completing e-learning or other courses provided by distance learning. More specifically, the CPD should be aimed at maintaining the Investment adviser’s knowledge of the appropriate qualification core subjects – i.e. Regulation and Ethics, Investment Principles and Risk, and Personal Taxation.
Statements of Professional Standing (SPS)
CP10/14 outlines the FSA’s approach to monitoring individual Investment advisers. Individuals will be required to provide their organisation with a Statement of Professional Standing (SPS), issued by an accredited body. In effect this body will act on behalf of the FSA to inspect the individual’s CPD activity, either by audit, or through self-certification, and supply a statement to confirm they have adhered to ethical behaviour consistent with that set out in the Approved Persons Handbook (APER). The accredited body must carry out random sampling of CPD evidence, which must include a “robust review of 10% of all advisers’ CPD records.”
The cost implications for all of the above may fall on the individual’s shoulders, with the obtainment of the SPS expected to cost between £60 and £175 per year. It remains to be seen if individuals will recover this from their organisation, or if it becomes the norm for them to bear the cost.
This particular requirement will accelerate the take up by organisations of systems which make the recording and evidencing of effective CPD activities as simple, standardised and as mechanised as possible. Recording needs to be effortless, yet clear, enabling inspection to see instantly that the required hours have been completed and that they are relevant and at the same time evidence that the required Level 4, core technical knowledge has been retained. Integration of all of this information with MI on practical activities, including Key Performance Indicators, and individual Product Sales Data will be invaluable in presenting a holistic inspection of the individual’s Professional Standing.
FSA Supervision
Completing the picture will be the new FSA powers to suspend approved persons and to impose penalties on individuals who carry out regulated advice activities without a current, valid SPS. In this respect, the regulator acknowledges that it has 48,000 individual investment advisers currently approved to offer advice in the retail market, and monitors over 17,000 small firms, 60% of which have only one or two advisers.
The Retail Distribution Review is perhaps now over, and giving way to something of a Retail Distribution Revolution.
Mark Ehlinger - 7th July 2010