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Poles apart

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  • 16/12/2002
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It seems we are always awaiting the outcome of an FSA consultation paper at the moment, but there are always clues in the documents for those who want to get ahead of the game

There has been plenty of speculation in the media recently, ahead of the publication of the feedback to CP121, concerning the direction in which polarisation will go.

The feedback paper was due for publication at the end of November or early December this year, but it will now be published during the Christmas break.

However, there are some clues as to what it should contain, and those advisers who want to stay ahead of the game should take these advance warnings seriously.

Our information is that independent advisers will be free to offer their clients a menu of charges that can be a combination of fees and/or commission.

The Financial Services Authority (FSA) has withdrawn its proposal that independent advisers are to only be paid by a defined payment system of fees, and the Association of Independent Financial Advisers’ (AIFA) suggestion for a menu-based approach appears to have been adopted.

Another paper currently under consideration is looking at how the future examination structure will work in practice. Although the FSA will consult on mortgages, general insurance and lower risk products separately, the recent publication of CP157 ‘ the examination framework for retail financial services (investment advice strand one) covering investment and risk ‘ outlines the FSA’s proposals for that sector and provides an early indication of what is to come.

Changing structure

The FSA is setting out to create a new examination structure for the financial services industry. The starting point is presented in CP157 and addresses a key strand of investment and risk advice. Other strands will complete the structure.

The original consultation process for this began with Discussion Paper 9 (DP9), published in December 2001, which set out the case for a new examination structure for the financial services industry. The Feedback Statement was published in May 2002.

The background to this publication was explained as coming from:

• A confusing and inflexible matrix of examination routes within the industry.

• Inconsistencies and differences in standards between examinations for the same industry.

• The relationship between examination achievement and the use of designatory letters is seen to be confusing for customers.

• Unnecessary time and cost is incurred in moving staff between activities and jurisdictions.

• There are gaps and inconsistencies in examination provision.

• There is a need to ensure practitioners maintain their competence.

Many advisers will have been involved in the work-shops held during the review process and may have been invited to the launch of the examination review results in the Gibson Hall on 28 November. At the launch advance copies of CP157 were distributed, with the final amendments still being made that morning.

The modular framework proposed in this paper is claimed to be more flexible and better matched to the needs and changes of the market. It is designed to help raise standards across the financial services sector and to improve customer protection. It aims to do this by ensuring those who give advice have a sound understanding of its key principles such as investment risk.

A new framework of examinations is being proposed and a consultation prepared. The learning outcomes and indicative content appear to be more appropriate than FPC 1, 2, 3 and AFPC.

Testing times

The good news is that, as indicated in DP9, advisers previously assessed as competent and with the appropriate examinations (FPC 1, 2, 3 or the equivalent) at a given transitional date, will be ‘grandfathered’ into the appropriate level of the new examination framework.

The style and method of assessment, in addition to the content of the new modules, will be new. The focus will be on how assessment methods can most effectively test the knowledge, understanding and skills needed.

The FSA is also keen to explore other mechanisms for ensuring advisers remain competent. It is likely the FSA will introduce regular assessment and training in order to ensure regulatory, legislative and product knowledge is up to date.

The consultation paper also suggests many benchmark standards for certain examinations or modules will be assessed by the authorised firm.

Any comments advisers may have on CP157 should reach the FSA by 31 March 2003.

Ian Langley is a tutor with Incisive Training, a professional training organisation set up in conjunction with Mortgage Solutions to help mortgage advisers to pass the MAQ qualification. He is also a director of IFAct Mortgage Framework Ltd, which specialises in Compliance Solutions for the Mortgage Industry and is part of the IFAct Group of Companies.


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