The FSA has published an RDR Interim report. The report is essentially a discussion paper covering the retail investment market.
Previous feedback has called for a clear separation between advice and sales and enhancement of professional standards. The intention behind which is to make it easier for consumers to understand the services they are buying.
The interim report has set out how this might be achieved.
Advice
Under the RDR, an IFA offering advice would have to meet certain requirements:
- They would recommend products from across the whole of the market.
- They would operate remuneration arrangements that are agreed with customers and which are determined without input from product providers.
- They would adhere to higher minimum academic professional standards.
Sales
The starting point for a simpler future structure is that all ‘sales’ are non-advised and that sales would either be undertaken on an execution only basis or as guided sales.
This simpler framework has a number of implications in terms of learning and development. There seems to be little doubt that diploma level qualification will be applied as the minimum academic qualification for advice. Aside from the obvious challenge in ensuring that all advisers meet the relevant standard by an agreed date, this in itself presents new issues. Most firms have expressed concerns that there would need to be a transition period to ensure that the market can continue to service consumers as advisers upgrade their qualifications. But how then do we monitor the continued competence of staff qualified to this level?
The regulator has challenged the industry to work towards the development and implementation of an agreed common framework for professional standards. They have specified that this common framework should include standard setting, examinations, continuing professional development, ethics and behaviours. They have acknowledged in the report that competence is not just about examinations. It is also about skills, knowledge, expertise, ethical behaviour and the application and maintenance of all of these.
Some of those involved in providing feedback for the discussion paper have expressed interest in a form of ‘on the job’ assessment including both testing and knowledge application for existing experienced advisers to demonstrate the requisite minimum levels of competence and knowledge, as an alternative to examinations. The FSA have agreed that this idea should be explored further.
For certain, having the means to easily assess financial services knowledge and application at a more advanced level will place firms ahead of the game. Web based competence testing has historically supported the testing of level 3 competence.