Appropriate Qualification Exam Standards must reflect changing markets, product types and lifestyle needs


The FCA’s training and competence regime helps to protect consumers by ensuring that staff working in financial services are appropriately qualified and regulated. A light touch review of the ‘appropriate examination standards’ (AES), owned and maintained by the regulator, started late in 2015 in order to reflect relevant developments that may have impacted on the ‘entry level’ knowledge required to undertake specific activities, for example providing financial advice.

The review was of particular interest to us at the Chartered Insurance Institute. As the world’s leading professional body in Insurance and Financial Planning professions, the remit of our Royal Charter – to secure and justify the confidence of the public in our membership – involves the provision of examinations for regulated financial advisers. Several of the CII’s Awarding Body staff members and subject matter financial planning and mortgages experts were ideally placed to advise the FCA on the standards.

Through the pre-consultation industry working groups set up by the FCA, the CII’s input led to the proposals that featured in the consultation that opened a year after the overall review had commenced. These proposals focused on updating the AES, the modus operandi for reading the appropriate qualification tables – which had been over-complicated for some time – the option to reduce the number of AES for ‘regulation and ethics’ from three to two based on the level of achievement, and the potential for an additional equity release qualification to help consumers access this market.

The desire to update the AES and the content of the proposals were largely welcomed at the CII, as we considered such a review to be long overdue. However, in light of changes to market structures, product types and the increasing focus on particular lifestyle needs, we felt as though the review was a missed opportunity to consider underpinning structural issues such as the make-up of the regulated activities order itself, or the levels of the qualification required for particular activities.

These proposals focused on updating the AES, the modus operandi for reading the appropriate qualification tables – which had been over-complicated for some time

Despite the range of views expressed on the potential merits of introducing an alternative route for financial advisors to offer equity release, we informed the FCA that we considered the divorce of mortgages entirely from this qualification content an inappropriate course of action to take at this stage. We maintain that there are still strong links between the two, particularly when taking newer mortgage products for older people into account. Our concern is that any re-fashioning of content or decoupling of equity release from the mortgages unit would need to be designed carefully so that there is sufficient mortgage-related content in the equity release component to enable proper levels of competence and the fair treatment of customers

In addition, a membership survey of over 1,500 financial advisers on behalf of the CII’s Personal Finance Society in December 2016 indicated an increasing trend towards more integrated planning advice rather than advice tailored to specific topics. This is in part a reflection of changing demographics and the need for a more integrated approach to the complex and interrelated needs of those in later life, such as the adequate provision of levels of retirement income, the funding of long term care and intergenerational wealth transfers.

However, this current context does not preclude that such a twin-track approach to qualifications may not increasingly align itself over time with the needs of the wider adviser market as it seeks to meet the changing needs of specific consumer groups. It is likely that the equity in people’s homes will play an increasingly important role in the medium to longer term – as the equity release industry currently report preparations for an increase in enquiries and business for two main reasons. First, that pension freedoms have subverted the previous monopoly the annuity market had on pension planning, creating a future landscape of more variable products and processes, in which housing wealth may sit comfortably. Second, that consumers may well begin to see the ‘bricks and mortar’ of their homes as fundamentally part of their retirement and later life finances and advice needs.

So despite the concern expressed by some stakeholders that the current structure of the equity release appropriate qualification may be a barrier to advisers becoming qualified, limiting the access of consumers to equity release products, our evidence leads us to conclude that it is unlikely there would be an immediate surge in numbers as a result of either approach in what is still deemed to be a specialist activity, albeit in support of the growing equity release market in recent years. This, as with other market developments, will need to be monitored closely.

Overall the FCA deserves praise for its willingness to engage with relevant stakeholders early in the process of reviewing the proposed updates to the AES, and the thorough and systematic manner in which the review was the conducted. The CII will continue to be at hand to support the regulator in ensuring that standards reflect market developments and changing regulatory and legislative requirements.


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Public Affairs Executive at The Chartered Insurance Institute

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