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The Actuary The magazine of the Institute & Faculty of Actuaries

Soapbox: The height of professionalism

The Financial Services Authority’s (FSA) latest version of its retail distribution review (RDR) has, perhaps inevitably given the strong vested interests involved, generated considerable heat and column inches over the vexed and ill-defined divide between ‘advice’ and ‘sales’.

However, no less important, and indeed integral to this argument, is the issue of professionalism and, therefore, the reputation of practitioners at a time when the esteem of the financial services sector could not be much lower. The FSA pulled together a group of ‘professional’ bodies to come up with a set of proposals to be integrated into the RDR on how to raise the reputational bar of the financial adviser. Sales was parked for the moment in the too-difficult tray.

It did not get off to an auspicious start. It was accused of being a self-selecting cabal of vested commercial interests and of not representing the adviser community. After several months of negotiation, the group came up with a proposal to put in place a structure that includes a standards board and a code of ethics. Educational achievement is to be raised a notch, and advisers may possibly be allowed to add a practising certificate - maybe even more than one - to the plethora of letters they can put next to their names, simply by paying to belong to a variety of professional bodies, a dubious practice dubbed the ‘alphabet soup’.

The deeply cynical consumer cannot be blamed for suspending judgment. For the issue is that professionalism, that concept of combining appropriate skills and knowledge with integrity for the benefit of the consumer, is not created through layers of bureaucracy, codes, certificates and titles. It is a reputation that is built up over time and through example. Nonetheless, we live in a world where form is so often triumphant over substance and so it was important to ensure that if such a structure was to be put in place, it at least had to be seen to have some credibility. That is, in as much as it was possible, it had to be free of all vested interests.

Statutory teeth
The ifs School of Finance was instrumental in ensuring that the putative standards board be independent. For any of this to have a jot of acceptability, the main driving force had to have statutory teeth - which only the FSA can give it - and its composition had to be made up of both industry and non-industry specialists, with the latter in the majority. The professional bodies are to be excluded.

This new Independent Professional Standards Board (IPSB) will, rightly, set the agenda. It will come up with an appropriate code of ethics and work with the Financial Services Skills Council (FSSC) to ensure certain minimum standards of education are achieved. The argument is that this minimum should be at Level 4 of the Qualifications and Curriculum Authority’s framework. This is fine, providing Level 4 is a minimum and not an end in itself.

Continuing professional development is to become compulsory but the challenge will be to create a meaningful ongoing learning environment that goes beyond simple box-ticking. This is easier said than done, as most other professions where it is required will note. There is also a wish, by some, to introduce practising certificates. They are superfluous to requirements, a superficial trapping and an unnecessary cost, especially as the only ‘document’ of relevance to the adviser is the FSA’s register of authorised practitioners. A sensible compromise might be to create an appropriate print-out or certificate generated from the FSA’s own register. That at least would have the merit of being cheap and credible.

The consultation period will be instructive, particularly with regard to costs that, while addressed in the document, have not been derived from a full cost-benefit analysis. The real jury in all this will be the consumer, and that judgment will take a long time in coming notwithstanding the new edifice.