The CII’s new reassessment exam has increased focus on how advisers maintain competency, yet just 57 per cent follow a process

Each month, our New Model Business Academy surveys its members on hot topics. With the recent introduction of a reassessment exam from the Chartered Insurance Institute and FCA, last month we looked at the way in which advisers demonstrate their competency.

As you know, there is a difference between continued professional development and demonstrating competency. Since the introduction of the RDR, 35 hours of CPD must be completed each year by retail investment advisers to ensure they have the knowledge and skills necessary to keep up with a changing market. This enables them to apply for their Statement of Professional Standing each year, which allows them to continue giving advice.

Compliance tip: Preparing for compulsory reassessments

In terms of demonstrating competency, the FCA handbook’s TC 2.1.12 maintaining competence says: “A firm must review on a regular and frequent basis employees’ competence and take appropriate action to ensure they remain competent for their role.”

In addition to this, the regulator recently commented that “not all firms test their advisers’ knowledge yearly as part of their SPS, with many never retesting”, and “we believe advisers having a good level of knowledge is the foundation to giving sound advice. This is particularly the case with the more technical aspects of advice. The objective of the re-evaluation is to identify areas of strength and weakness in technical knowledge and its application that underpins suitable advice”.

As with everything in the handbook, this is open to interpretation by individual firms, networks and service providers. There are many ways in which a firm may wish to meet the regulator’s requirements, including, but not limited to:

• Online or offline product-based testing
• Online or offline diploma exam-based testing
• New reassessment exams from professional bodies like the CII or LIBF
• Other in-house training and testing exercises.

As all advisers must be Diploma Level 4 qualified, it stands to reason that competency is measured against this same level each year.

The CII has commented that its new reassessment exam “will provide firms with the ability to independently assess their advisers’ knowledge and development needs against the industry standard. This is part of a firm’s obligations to ensure advisers are and remain competent”.

Narrowing the options
However, it is clear not all advisers or firms follow the same process to test competency as there are so many options available to them.

In response to our question to members asking “Do you have a process through which you are able to demonstrate your competency and technical knowledge beyond CPD?”, just 57 per cent said yes.

Is the new adviser re-evaluation test fit for purpose?

For those who said yes, this was delivered by their service provider in the form of annual testing and role plays, or they used an online testing system. Some members also said that their way of demonstrating competency was via new exams, through professional bodies at either diploma or higher level.

A lot of those who responded no remarked that this was either because they did not know they needed to as they track their CPD, while others said they refused to do so as CPD should be sufficient.

Some requested clear guidance as to what they should test on, how and how often. Others said the CII’s new exam was “another way for it to make money out of us”.

A couple of smaller firms said they did not have the resource to provide this service for themselves without in-house compliance staff, although there are testing systems available which come at a small cost.

A lot commented upon their reluctance to introduce a process, as they felt they already had “enough to worry about”.

Overall, it was clear that those who did not have a process might need some help in establishing one and accessing a service that could help them. That said, the result as a whole was positive with the majority of our audience having a process in place.

Matt Timmins is joint managing director of The SimplyBiz Group