Locking in degree level requirements could do more harm than good, says respected industry consultant, Russell Hutchinson.
In his submission to the Code Working Group (CWG) consultation paper, he specified his concerns with competence requirements outlined in the framework for developing the new Code.
One concern is that the Code’s intention for compliance costs to be minimised appears to be contradicted by the proposed requirement of a Bachelor’s degree plus specific financial planning knowledge.
Hutchinson also expressed issue with the lack of a definition for financial advice, as only two different types of advice were described.
He referred to the description of financial advice in the CFP qualification as a good definition and that if adopted, it would capture a large proportion of insurance advice under financial planning and be subject to those competence requirements.
He also raised concern over the degree requirement impacting the industry’s ability to recruit advisers, as it would shrink the pool of potential candidates.
Hutchinson asked the CWG a number of questions in his submission about:
- Whether degree level qualifications are best suited to fix any market failures in the advice market for insurance
- Whether the specific degrees listed will be relevant enough to address these market failures through increasing competence, knowledge and skill
- If they are, whether degrees are the best way to achieve it, keeping in mind the aim to reduce compliance costs
He suggested some alternatives to the proposed competence requirements, including the suggestion for existing advisers to take a test, taking into account a portfolio test based on quality of financial plans prepared and years of experience.
He also recommended to recognise ‘any degree’ as sufficient evidence of the level of thinking and a level five qualification.
“This is a strong framework,” Hutchinson said in his submission, of the Code Working Group’s proposals, adding, “…and although I have some serious misgivings about competence requirements in particular, if submissions are heard and responded to, there is no reason that the outcome should not be good.”