The FSA’s interim statement on the Retail Distribution Review (RDR), published at the end of April, threw down a gauntlet to the industry to develop and implement an agreed common framework for professional standards.
The interim report suggests that the minimum academic qualification for intermediaries to give advice could be increased. It also implies that most small IFA firms are keen to achieve higher professional standards, with research claiming 76 per cent would like to be in the top tier of financial advice firm.
The FSA says it understands that adviser competence is not merely based on passing exams, but is also related to skills, expertise, ethical behaviour and knowledge. And the regulator suggests that professional bodies would be well equipped to develop these abilities.
This announcement was met with great enthusiasm by the Financial Services Skills Council (FSSC) – the official standards-setting body for the UK financial services industry. The FSSC has consistently noted that professionalism is a combination of knowledge, skills and behaviour, and in its response to the FSA aim to redress this balance it is at pains to further emphasises that skills and behaviour should be held in equal regard to knowledge.
Five point plan
It has even gone as far as implementing a five-point plan of action to tackle some of the biggest skills issues facing financial services, as outlined in its recently published – The Skills Bill: a Sector Skills Agreement for the financial services industry in England
The Skills Bill presents the final outcome of an eighteen-month programme of work to develop a Sector Skills Agreement (SSA) for the financial services industry in England. SSAs are agreements between employers, stakeholders, the Government and partner organisations, designed to address the major skills challenges facing the UK’s most important industries.
The priorities identified by the FSSC are:
· Tackling management and leadership gaps: This is considered the most important issue facing the industry and first priority for 63 per cent of all UK financial services firms. This is the only priority common to all sectors in the industry, relevant to all occupations and involving all staff.
· Attracting new entrants: The decline in the pool of new entrants is cited by almost half of all employers as a high or first priority for the SSA to address.
· Building generic skills and work-readiness: Employers believe that a large proportion of the people entering the industry are not ready for the demands of the financial services workplace. Employers identify interpersonal, soft and other generic skills (such as communication skills) among school leavers and graduates as the skills that determine the ability of new employees to adapt and excel in the workplace.
· Regulatory v non-regulatory training: Regulatory driven qualifications and training dominate the industry and investment in skills. Employers recognise the need to balance regulatory training with training that develops skills and competences as well as knowledge.
· Developing a value proposition for SMEs: Small and medium-sized enterprises make up around 98 per cent of firms in the industry (more than 33,500). Research reveals an overall lack of investment in training among small companies. SMEs often fail to train even key staff owing to a lack of resources, time or appropriate internal structures. The agreement addresses SMEs separately because they differ fundamentally from larger employers.
Skills
As we all know over recent years training, training and more training has been the message set out by the majority of our industry and due to RDR proposals and initiatives like the one by the FSSC this looks set to continue.
Unfortunately, as with most things in today’s market, there is a BUT and I suggest that the biggest BUT in the current financial climate is that we need to be careful that the skills gathered over years of experience are not simply washed over by the desire to go regulatory ‘badge collecting’. This is certainly a situation not helped by the fact that we have a number of recognised exam bodies continually bringing out more and more exams, certificates and diplomas.
A broker recently asked me the relatively simple and innocuous question of - why the industry can’t get the exam bodies to join together to be able to simplify the options? My answer is that I honestly don’t know but what I do know that it is little wonder intermediaries are becoming confused and it is vital that they consider their chosen routes carefully in order to keep up with the ever changing world of financial services.
Exams
Looking specifically at the equity release sector, there is now a structure in place for brokers so they can confidently enter this market. From a regulatory exam point of view there is now a set of exams for those entering the market for the first time as well as various ‘top up’ options for existing advisers and these become fully implemented by the FSA as a requirement to advise from April 2009. However, it is important to remember that SHIP providers will not accept reversion business from April 2008 if you do not hold a suitable exam. The exams themselves are relatively straight forward and can be sat at local exam centers.
Study material is available direct from the exam bodies and there is also now an online study facility available at www.equityreleasetraining.co.uk. The website will allow advisers to study material specific to equity release at their own pace via comprehensive online testing with instant results and, importantly, correct explanations when questions may have been answered incorrectly. There is unlimited access available to the training programme for a set period. Continued Professional Development logs and certificates are available to add to training & competence files or to be stored online and advisers are able to pit their wits against the computer to sharpen their advisory skills.
In an emerging market what brokers need most is training and support in a much wider sense, to build and develop their business in a robust way. This is being helped by providers in the equity release sector as they are putting real effort and resource into training and supporting both those intermediaries looking towards and those already advising in the sector.
The business development staff at these providers have a range of things to help, including presentations, templates, websites and development training as well as the ability to sit down with advisers and discuss how they want to position themselves and how they want to get their clients. In addition there are a number of written guides available to bring a number of these ideas together.
Opportunity
There are also commercial arrangements that need to be taken into account. Networks are beginning to understand that this sector is an exciting opportunity and their training and compliance teams are beginning to take notice. Good networks will be working with their members to identify new opportunities, provide information about those markets and use their influence with lenders regarding product design.
It is important that lenders and networks are hosting training and information seminars and have these skilled business development managers working with brokers to develop and implement realistic business plans.
There are also specialist service providers such as Equity Release Club with our recently launched “ERC Assist” package that for a small monthly cost will provide support desk back up, software, training and a range of additions to help brokers maintain a healthy business model.
We, as an industry, have to accept that in this time of sophisticated financial online comparison sites standard mortgage products will increasingly be sold to the standard borrower on a direct basis. It appears that the days of ‘churning’ short term fixed rate deals and large proc fees for sub-prime cases are all but gone. However, when it comes to the more complex areas of the market such as commercial, buy-to-let or indeed equity release then there is still no doubting the value that brokers can add to their clients. So brokers must look to other channels to supplement this lost income but in order to do so there must be sufficient good quality training and support available to help them and maintain the high standards of advice that are imperative to the long term survival of brokers.
More focussed
Training and development should go ‘hand in hand’ and it is fair to say that the equity release sector is much more focused than the established markets in this respect, with providers making massive efforts to help intermediaries. It is imperative that standards of advice are consistently high. We need to work together to ensure all advisers are fully skilled and armed with all the tools necessary to be in a position to offer the best possible advice on all aspects of equity release.
It is in everybody’s interests that a vibrant, well qualified and experienced broker market not only exists, but flourishes and maybe lenders in the more established markets should take a leaf out of the example set by equity release providers in order to help make this happen.
