Exams never seem to end. From school, to your driving licence, to qualifying as a mortgage adviser, it’s understandable if one becomes slightly frustrated at having to jump through what feels like endless hoops. Now Assetz, the property investment company, has suggested another exam is exactly what advisers need, to prove they can give adequate property investment advice. But do IFAs really need another piece of paper to advise on commercial property?
Crying out
Stuart Law, chief executive of Assetz, claims financial services is ‘crying out’ for a property related qualification, as current courses do not include any detailed aspect of property investment. He says many IFAs have a limited knowledge of basic commercial property and are ill-equipped to offer advice on the different aspects of property investment, which he believes is unacceptable when property is such a popular asset class.
Law adds that property is historically misunderstood as an asset class and advisers need more than a basic knowledge to understand how different subclasses, including commercial, residential, student, affordable and overseas arrangements, act under different circumstances. He explains: “A formal qualification must be introduced to address the gap in the training syllabus, enabling IFAs to offer knowledge-based advice to their clients.”
Methodology
However, the suggestion has not impressed some. Alan Lakey, partner of Highclere Financial Services, says the reasoning is only sound for a few advisers, not the majority. “If a client comes to me wanting to buy a property, then I am not giving advice on whether it’s a good property; I am giving advice as to the methodology of buying it. The majority of advisers fall into this category. The argument has some merit if clients are coming for advice about investing in property, but I think a lot of advisers don’t want to be constrained by having to have another qualification. This would not be a move forward.”
Lakey adds: “Financial advisers already have the necessary qualifications to advise on investments and in my opinion, property is no different to a share. My job is to give advice on which company is competent; I can’t give advice on a single share, but I don’t need to, because that’s not my job.”
Peter O’Donovan, mortgage manager for Bestinvest, likewise feels a qualification is unnecessary, though having more knowledge on property would be beneficial. He explains: “IFAs only need to know the basics and can then refer clients onto a commercial property specialist. An IFA would have to be doing cases week in, week out to make it worthwhile.
“Property can be a bit of a minefield, as there are so many subclasses, but I don’t think it’s particularly misunderstood. So much has to be learned and it’s too much for one adviser to know, but I don’t think it’s necessary. I am not a pensions specialist, but if I am asked about it, I have enough of a basic idea to talk about it initially and then I would pass it on to a pension specialist. Most IFAs tend to specialise anyway.”
O’Donovan adds: “If you’re giving an overall look and looking at investing in stocks or property then you’re looking at what property does. But I think most IFAs have enough knowledge to give a basic overview of the market. Commercial is totally different to residential property, which is quite straightforward. Yet, the exams for this are good standard and give you a good knowledge of property.”
Valid point
However, John McClelland, principal of Knightsbridge Financial Services, believes Law has a valid point. “Commercial property is difficult,” he explains. “To properly advise a client on the pros and cons would require an IFA to have a fairly good understanding of the commercial market, as it’s quite a specialised field. In our industry it does no harm to have exams. There are some advisers that have no knowledge of commercial deals and exams focus your mind. We should remember we are in a very responsible role, especially as property funds have soared in value, as commercial has become very much a vogue asset.”
While Lakey adds that it is laudable to increase standards, he says there is a danger in bringing in further exams. “You would end up with a lesser number of advisers falling into the niche categories, which erodes the advising availability in the country. Financial advice takes in the whole picture of a client’s financial situation. If the adviser can’t advise on certain aspects, the client can’t be advised fully and will have to find a new adviser. To be fair, most companies specialise, but this is a step too far.”
Yet, unless the Financial Services Authority deems it necessary, it currently seems unlikely the call from Assetz for a property qualification will bring anything to pass for now. While being competent to advise on a certain subject generally is necessary, there always have been and always will be specialists for the detailed work a client requires. For many, as long as the client’s needs are being met correctly, an exam will not be necessary.
