Statement by the Chartered Body Alliance

The Chartered Body Alliance (the Alliance) notes the new ESMA guidelines which come into force from January 2018 and require most advisers to have ‘qualifications’.

However, the ESMA guidance concerning the definition of a ‘qualification’ is broad and does not distinguish in value between a five-hour training course or a benchmark, examined, level 3 (or 4) qualification.

Members of the Alliance believe there is no comparison between an individual who has achieved a qualification awarded by a Chartered Body, and a non-examined training course.

The Chartered Body Alliance is committed to raising professional standards and recommend to firms that, in the public interest, they should ensure their staff have the highest levels of competence, best demonstrated by taking a formal benchmark qualification from a Chartered Professional body.

Detail:

The European regulator, ESMA, has revealed detailed requirements under MiFID II regarding the knowledge and competence of retail and wholesale investment advisers.

Although insurance companies are exempt from MiFID II, their asset management subsidiaries will be subject to them. The FCA already requires retail investment advisers to have qualifications under the RDR.  However, advisers to professional clients such as fund companies and pension funds now will be required to have ‘qualifications’.

This applies to the retail and wholesale market and therefore is the first-time qualifications have been mandatory for the wholesale market since qualifications were changed to advisory by the UK regulator in 2007.

‘Qualifications’ under the Guidelines are defined as examinations, training or tests and the FCA is proposing to leave it to firms to decide which of these routes to take and to judge the fitness and competence of their employees.

The Alliance fear that some firms may be tempted to take the easy route to justify this qualification requirement and may opt for the minimum requirement of a five-hour bespoke training course.

Typically, a Level 3 qualification would require approximately 100 hours’ study, and knowledge would be tested and verified during an independent exam.

The Alliance are encouraging the FCA to guide firms to appreciate that the Guidelines are intended to provide a step change in employees’ knowledge, and that the training and test options to ‘qualifications’ should reach the same level i.e. Level 3 or Level 4 (the current standard for the retail advisory sector).

Whilst we understand that the FCA may not have the appetite or remit to do this, we see it as our duty, as the newly formed Chartered Body Alliance, to bring this new requirement to the attention of senior management in firms so that they have time to choose the best route to qualifications, and are not pushed into the easy training option because of the shortage of time.

This is timely because there is no ‘grandfathering’ and the ESMA Guidelines come into force on 3 January 2018. Commercial providers are already promoting training courses in place of examinations as an easier route to achieve the standard. The Alliance does not wish to see a “race to the bottom”.

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