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Old advisers get no support from the TSC

Old advisers get no support from the TSC

Saturday’s report from the Treasury Select Committee (TCS) on the Retail Distribution Review (RDR) is out and their main conclusion is that the Financial Services Authority are on the right track with RDR with one major exception – the demand that all IFAs hold level 4 qualifications after the 31st December 2012.

The TSC recommendation is that the implementation of RDR be delayed by 12 months in order to allow more of the advisers to reach to required educational level.  But this conclusion seems to ignore the issues involved in the evidence presented to them.

Most of the arguments put forward by the advisers objecting to the need for new qualifications were in favour of grandfathering – the automatic regulation of some advisers without achieving the educational qualification; no one was looking for extra time for qualification.

As far as most of the objecting advisers were concerned, the problem was for those near the end of their career .  What would be the point of spending time achieving a qualification which would only be useful for two or three years?

Also, as they pointed out, advice based on the accumulated experience of decades of providing financial advice will cast aside, to be replaced by advice from younger advisers, who have passed exams but may not have the life experience to truly provide the best advice for the consumers.  After all, if it was purely a matter of following rules, the entire process could be automated and IFAs done away with altogether.

The TSC ducked out of the issue of grandfathering using the excuse that grandfathering older IFAs would discriminate against younger IFAs under the Equality Act.  This was a shortsighted approach, as exceptions are allowed under the act as “ a proportionate means of achieving a legitimate aim”.   And the aim of keeping experience levels high in the area of financial advice provision is surely a legitimate one.

With 14% of IFAs aged between 54 and 59 and 18% of them aged over 60, the insistence on new educational standards for all IFAs could lead to a much larger reduction in their number than the 20% previously estimated, leaving a large section of the population without access to advice at any price.

RDR was designed to reduce consumer detriment caused by poor advice from IFAs.  Ironically, by leaving so much of the population with financial advice, RDR could end up inflicting far more serious consumer detriment RDR was originally designed to remove.  And a delay of a year will not mitigate this at all.

Tom Murray

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