Under the recent Retail Distribution Review (RDR), providers of financial service have had to become ‘Level 4 Qualified’ in order to continue providing advice. There is now increasing concern that the standards for Financial Services Contractors will also be raised.
The financial services industry is undergoing drastic changes. In December 2012, new rules and challenges were implemented through the enforcement of the Retail Distribution Review (RDR).
Providers of financial services had to adapt their business models to embrace the changes and to ensure that they are ready to operate in the new industry landscape.
The RDR set a number of rules ensuring that retail customers receive suitable and truly independent advice that meets their needs. One of these specified that all advisers operating must be adequately qualified to a level equivalent to the first year of a degree.
This meant that advisers had to become ‘Level 4 Qualified’ in order to be RDR-ready, by completing gap-fill modules. Failure to do so would mean they would have to cease providing advice.
There are indications that the number of financial advisers has declined due to the cost burdens associated with this rule. The Association of Professional Financial Advisers (APFA) noticed a decline of financial advisers and stated that:
“It is vital for financial advisers that the amount the FCA asks from them is fair and proportionate, especially as they are already dealing with the costs of RDR.”
How does this affect financial services contractors?
Whilst advisers have had to catch up with the new rules, should financial services contractors involved in past book investment and compliance review consider upgrading their qualifications?
There is an increased concern amongst contractors that the standards will be raised and their services will no longer be as desirable.
Madhu Herar, a financial services contractor who has recently qualified in Level 4, has expressed the following:
“I feel that the level 4 QCF will soon become the benchmark requirement for wealth related projects. I also feel it is important to achieve this standard to distinguish myself within this ever competitive market.”
However, others believe that alternatives to Level 4 are more suitable for their needs and feel no pressure to qualify at this point.
“I haven’t seen an indication that Level 4 is a must in order to gain work. Clients seem to value previous experience and transferable skills,” said Stuart Munro, financial services contractor.
Another financial services contractor, Andy Snook, agrees and believes that:
“Whilst becoming RDR level 4 qualified is a useful asset to any compliance person, when it comes to Quality Assurance in my personal opinion experience is the key to ensuring a really thorough file check. You can become ‘qualified’ in a reasonable time. It takes years to acquire the experience to really do the job justice.”
The Wealth Management team at Grovelands has seen a recent increase in demand for Level 4 qualified contractors. The projects dealing with past book investments, structured products and pensions advice are complex and in-depth technical knowledge is required. Clients do in some instances find profiles with particular qualifications preferable.
However there aren’t any serious indications to suggest that contractors must be qualified to Level 4 in order to operate. Previous experience is valuable when it comes to joining complex investment review projects and knowledge of relevant products is essential. Qualifications are an indication of a person’s knowledge and skills and are a great addition to any profile.
The competition is great between financial services contractors dealing with complex reviews and there is certainly an expectation that standards will rise in the future. There is an indication of a requirement that all those reviewing advice given by qualified advisers will need to be adequately qualified themselves.
Further information regarding appropriate gap-fills can be found here.
What do you think? Are you under pressure to qualify to Level 4? Or have you found that experience is more important? Join the debate on LinkedIn.