Do you know if your retail investment advisors have passed on time?

Richard Pawlyn, the Chief Executive of Worksmart discusses the impact of new FSA rules on retail adviser training and competency.

Anyone who regularly reads the newspapers or turns on the television will know that the Financial Services Authority (FSA) has over the last year or two been flexing its regulatory muscles both through enforcement activities and also through ever increasing reams of new regulation.


Through Policy Statement PS 10/18 – Competence & Ethics, the FSA has brought in, as expected, further rules that will apply to retail investment advisers. From an organisational perspective, it is worth taking time to look at how the simplest of rule changes can make a big difference to the policies and procedures of a large organisation.

Take the new rules that PS 10/18 brings in around adviser qualifications for example. Up until December 2010, as long as a retail investment adviser had taken and passed the regulatory module of a recognised qualification, they could work in an advisory role (subject to appropriate supervision, and the incumbent firm’s T & C scheme rules). There was no regulatory time limit with which to comply in order to obtain the full qualification.

However, with effect from 1st January 2011, individuals now have a 30 month time limit within which to achieve an approved qualification relevant to their role. The time limit will start from when the individual commences activity as a trainee (whilst at the same time working towards achievement of their full qualification), as opposed to when they might start an induction process for a new role.

If an individual fails to attain the appropriate qualification within the 30 month time limit, then the individual must cease to carry out the relevant activity until such time as they have attained the appropriate qualification that relates to their role.

So, have these regulatory changes had the biggest impact on the training team or on the compliance team?

Richard Pawlyn - WorkSmart

Richard Pawlyn - WorkSmart

Even with this new legislation, it is likely that the training teams that support retail advisers will continue to train in the usual manner. With the new deadline, whilst being important to an organisation, it is not really going to change the way in which a training team manage their induction programmes and on-going development training. The biggest impact is likely to be in the training and competence/compliance area.

It will become the responsibility of the monitoring teams and those responsible for employee competence to ensure they know specifically at what stage their employees are at in their qualification cycle.

If the penalty for non achievement of a qualification in a 30 month time frame is to have to stop carrying out the role for which you have been employed, then the consequences of getting this wrong are large indeed.

So what should a firm do to ensure that they won’t fall foul of this new piece of legislation?

With each firm applying their own policies and procedures, we could never cover all that needs to be undertaken in this short article, however here are a few ‘Top Tips’ to help get firms thinking about the changes that they may need to make.

  1. Firms should undertake a review of their training and competence scheme to ensure that any qualification deadlines that they have included within their scheme are aligned with the new regulatory requirements
  2. Firms should undertake a review of their recruitment processes, because part of the recruitment process now needs to not only cover, but record and count any time a new employee has already spent in the ‘trainee’ phase whilst working towards their overall appropriate qualification. The employing firm will then be able to identify how many months of the 30 month limit are left to achieve full qualification status
  3. Firms should undertake a review of their recording and monitoring mechanisms, as they will need to be able to record the time that an individual has used up from the 30 month rule in trying to achieve their appropriate qualification, and be able to deliver a countdown to those involved in managing an individual’s competence to ensure that no deadlines are missed.
  4. Firms should undertake a review of their qualification attempts policy and align timelines with the new legislation. As most firms operate a ‘three strikes and you are out’ approach to sitting both internal and external qualifications, any time lines attaching need to be aligned to the new legislation.
  5. Firms should undertake a review of their disciplinary procedures and contractual arrangements with staff in respect of qualification attainment. Firms will need to decide whether individuals who fall outside of the 30 month deadline will move into a disciplinary process that could in turn lead to cessation of contract, or whether an appeals process will be embedded as the likelihood of this happening except in exceptional circumstances is rare.
  6. And finally, firms should review their employment contracts for new starters to ensure that appropriate action can be taken if an individual fails to achieve the relevant required qualification and then is no longer able to operate in a role.

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