What does the future hold for chartered status?

By Hope William-Smith

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Jun 06, 2019
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With the title causing contention among advisers, the profession asks whether it remains the gold standard

While Level 6 qualifications are often billed as one of the biggest differentiators between advisers in the profession, the debate over their relevance is continuous.

Lauded as the “gold standard of financial planning”, holding chartered status continues to cause a divide between advisers who choose to commit to the continuing examinations, and those who believe on-the-job experience speaks for itself.

An increasing number of advisers have set out to achieve chartered financial planner status in recent years; the number of chartered planners registered with the Chartered Insurance Institute has risen by more than 60 per cent since 2010.

The increase was most likely fuelled by the implementation of the RDR in 2012 as the industry looks to professionalise itself from the inside.

Among chartered firms – where currently at least 25 per cent of advisers must hold chartered status – the CII says 82 per cent felt that promoting the title was either of high or medium value.

The title “chartered financial planner” has caused contention in some corners of the profession, however.

Those who hold a chartered designation specifically have long argued they hold considerably more knowledge and can offer a broader skill set than their Level 4 qualified peers.

While not the only path to higher qualification and recognition, the title’s prominence has also been misused by some.

This has come under heavy scrutiny from the CII, members of the Personal Finance Society, and the FCA, with calls to root out those falsely claiming to be chartered.

As an increasing number of advisers look to upgrade their skill sets to pull advice out of its murky past, how prominent will chartered status be in the future? Money Marketing takes a look at whether it is still worth the effort that its holders say it deserves.

Re-defining chartered’ 

The CII believes the extra step of accomplishing chartered status demonstrates a “public commitment” to professionalism.

CII professional standards director Melissa Collett says: “It is for businesses that really want to demonstrate to their customers that they have met a demanding criteria of qualifications, numerous amounts of continuous professional development work and have done this with an ethical approach to business.”

When the CII recently announced it would update its corporate chartered designation, however, the outlined changes met mixed reviews.

Despite the uptake in interest for Level 6 training, the amount of chartered firms could slip as a 50 per cent threshold – meaning at least half of firms’ advice staff must be chartered for the firm itself to be designated the title – comes into play next year.

The annual BWD/Money Marketing adviser census for 2019 is open and is asking planners to indicate whether they are currently chartered or expecting to attain chartered status in the next two years.

BWD’s Bret Jackson says more than 50 per cent of respondents so far have indicated that they are in the process, despite the changes.

He says: “I could even see Level 6 becoming mandatory with advisers pushing to have more specialised knowledge. Level 6 will then become the norm, which means advisers will need to look for other ways to stand out.

“The rise of paraplanning as a stand-alone profession also means advisers are starting to look at how they can take an extra step to differentiate themselves.”

The CII will also be promoting chartered status to the public through more advertising.

Collett says: “Public trust in the finance sector really lags behind that of some other professions where chartered status is already recognised and understood by consumers, and promoting it will help build trust in the profession as a whole.

“Our re-positioned corporate chartered status is more clearly focused on a shared, public declaration of professional standards.”

Expert view

The rise of paraplanners is pushing advisers to a new level

More and more candidates are pursuing Level 6 qualifications in order to either join, or indeed just keep ahead of, other advisers.

With the Level 4 Diploma now being the minimum entry level for an adviser, there are a huge number of advisers, as well as those in other roles such as paraplanner, going on to continue with Level 6 with the aim of achieving chartered status.

As well as demonstrating a high level of technical knowledge and understanding, a Level 6 qualification and chartered status ensures that individuals have an immediate advantage in the job market.

However, despite efforts in the profession, there seems to be a lack of understanding by consumers as to what “chartered” means and, importantly, what difference it makes to them. This seems like a continuing opportunity to educate consumers, and for those with chartered status to stand out.

Since RDR,  the number of Level 6 exam candidates has increased year on year and that is expected to continue as we see new entrants to the profession, as well as those who have taken a break from exams and choose to restart their journey in order to ensure that their knowledge is as in-depth as possible, and to gain a competitive advantage.

Catriona Standingford is the founder of Brand Financial Training

Managing public perceptions 

The carry across of the term “chartered” from other professions will likely be crucial to the expectations the public, as the end-customer, place on advisers in the future.

With chartered accountants and solicitors held to a defined set of standards, the inherent subjectivity over what makes good advice will once again be up for debate.

This could include discussions on stricter operating models and tighter control over fee structures if the advice profession wanted to mirror chartered models in other sectors.

First-timers to financial advice will not be cutting corners when it comes to searching for a sound adviser and are likely to place “chartered” on a comparable pedestal, Jackson says.

Those new to financial advice are likely to have knowledge and subsequent interest to search specifically for a financial adviser who is Level 6 qualified.

Jackson says: “People that make the decision to take financial advice will be putting in serious effort deciding the type of adviser that they want and trends would indicate many understand ‘chartered’ can be a better fit.

“If they are a client returning to advice and have had a bad experience prior to the RDR, they will be on the hunt for someone good who can prove their ethics are tried and tested.”

In this scenario, clients are likely to turn to the CII or Unbiased registers of chartered firms for an indication of which adviser to trust.

Jackson says: “It’s clients that matter at the end of the day and it’s becoming more common to see people looking on Unbiased or looking for pointers from [government guidance body] the Money and Pensions Service. If they do a search on Unbiased, chartered advisers are going to come out on top.”

Money Marketing approached MAPS for comment on how it would determine and ultimately answer an inquiry about whether a chartered adviser was more appropriate for a client than a planner with Level 4 qualifications.

A spokeswoman says: “When searching for a financial adviser, higher professional qualifications are always worth looking out for as they demonstrate additional expertise and knowledge and often mean an adviser specialises in a particular type of advice.”

However, Standards International founder Michelle Hoskin says upping the amount of compulsory exams may not be beneficial.

“Qualifications alone are not the answer to the conundrums that the industry faces and do not make a person into a professional. They are giving a boost in the right direction, but so much more is needed moving forwards.”

Indeed, the many CPD and exam requirements stipulated by the CII as part of the upkeep of chartered status have long faced criticism over whether they are stretched to work as a revenue generator.

The annual pass rate for all the units of the CII Advanced Diploma in Financial Planning aggregated together was 41.1 per cent for 2018 and 51 per cent in 2017.

The pass rates could be seen as demonstrative of exam difficulty, giving more weight to the argument that Level 6 qualified advisers have earned their stripes, given more than half fail.

Adviser view

Nick Bamford, Chartered financial planner, Informed Choice Independent Financial Planning

Culture is vitally important, and I put a lot of emphasis when speaking with clients on explaining our approach to ensuring they receive advice which is transparent and well-managed from a risk perspective.

I explain our firm’s attainment of chartered status both as a firm and as individuals is about the mark of respect that we have for our clients in that we are prepared to be tested to a high standard and continue to be prepared through CPD. Chartered is not the be all and end all, however.

Applying our skills as planners with trust and integrity, maintaining our knowledge and experience doing what we say we are going to do and having chartered status – none of these things are mutually exclusive.

Ironing out errors 

Money Marketing was informed by an adviser last week that they had reported a firm to the CII which was trading as a chartered firm, but did not appear on the CII register.

The problem is common for both the CII and Unbiased with the confusion over supervisory control opening windows of opportunity for unethical firms to capitalise on chances to forge their qualifications.

A director of a financial advice firm in Northern Ireland was fined and disqualified in June last year for issuing false documentation to the FCA, including two fabricated statements of professional standing purported to have been issued by the CII.

A month before, Money Marketing reported that a St James’s Place advice recruit had also been fined and banned for claiming to have passed R03, R04, R05 and R06 examinations. The candidate had failed the R05 examination, and had never sat the R03, R04 and R06 tests.

But Wingate Financial Planning’s Alistair Cunningham, one of the first advisers to be granted chartered status in the UK, says the title still faces unfair accusations of being too easy to obtain, though there has been a string of high-profile incidents of poor advice involving chartered planners which Cunningham says have damaged its reputation.

He argues that evidence of the chartered status’s erosion of importance in the eyes of the industry’s leading professional bodies is evident.

In a Money Marketing column last December, Cunningham said the CISI placed the former Institute of Financial Planning on the backburner when it merged with it.

Cunningham says: “It makes a mockery of the process I go through each year. If customers are being misled, what hope is there for the advice they give?

“There are firms incorrectly using the word ‘chartered’ in their name and some firms do not understand the rules and describe themselves as such as they may have individuals who are chartered.”

When it comes to recruitment, not all employers view an extensive string of qualifications and titles as the ultimate driver of good-quality advice. In recent years, the industry has walked a tough line between professionalising the industry through tighter education requirements, and opening the doors to school leavers and those without higher education with the argument that soft skills can be just as worthy as sitting exams.

Sandringham chief executive Tim Sargisson says recruitment is a consideration to factor in to the value you place on chartered status.

He says: “Putting a plaque on the wall is irrelevant if it is not accompanied by a focus on the outcomes acknowledged by everyone in the business.”

The diverse employment opportunities for advisers mean the “chartered” title will always present a benefit somewhere, however.

Jackson says some of the industry’s biggest employers are starting to make moves to impose stricter qualification thresholds on advisers, meaning chartered status could prove invaluable if looking to move away from working for a small IFA or network.

He says: “Level 4 is still the general standard for most, but private wealth managers and some of the larger banks coming back into advice are the employers most likely to demand Level 6. This has been the case at the likes of Barclays in the past.

“Changes to what employers expect are happening and we may well start to see a shift of people looking to progress ahead of peers who are willing to put in the work to get there.

“This is especially relevant as the public is starting to understand the significance of what ‘chartered’ means.”

Adviser view

Susan Hill, Chartered financial planner, Susan Hill Financial Planning

The CII rules for chartered firm status are that a firm must have more than one chartered adviser, meaning one-person adviser firms are still ineligible for this status. That means that the 89 per cent of firms with five or fewer advisers is reduced by the per cent with only one adviser. Those firms at either end of the scale will find it very difficult to attain firm status with the 50 per cent rule coming into play.

I wonder if that lends itself to individual chartered status and individual ethics and values becoming more important in establishing a wider professional culture than a board of directors who hold the qualification, but rarely advise. I hope so.

In a column in last week’s issue of Money Marketing, Rowley Turton director Scott Gallacher argued that the future of the ‘chartered’ title and its influence depended on the CII to protect it.

Collett says that despite the various errors on its register that have been reputationally damaging to chartered status holders, it has now stepped up its supervision.

She says: “The last review was completed in March 2019 and the CII and PFS’ directory is fully reconciled on a quarterly basis to ensure that only firms who have chartered status remain visible on the system, and when concerns have been expressed about firms and individuals being inaccurately listed as chartered on third party websites, the CII has contacted the companies that produce these listing sites.

“The third party websites have been told the only place to ensure that an organisation or individual holds chartered status from the CII is via the CII’s website and it is then a matter for the third party as to how it verifies and checks the accuracy of its search function.”

She adds the CII is working to improve its data and processes to ensure the register is error-free.

“A new lapse process was introduced to ensure that once a firm’s lapse date has passed, and where the CII hasn’t received an application, the firms are lapsed within three weeks,” she adds.

In a new move, Collett says the CII will move to a digital process to ensure better control of data gathered, which it hopes will clean up the register and ultimately lessen unwarranted negative associations between poor or fraudulent advice and the chartered designation.

She says: “The CII will be introducing digitalisation to all aspects of the application and renewal process to minimise the time taken by members in gathering and submitting data.”

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