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Categories: RDR| Long Term Care
Topics: LTC| Fay Goddard| PFS| FSA| RDR
The Personal Finance Society (PFS) is seeking clarity from the Financial Services Authority (FSA) on whether advisers will need extra qualifications on long term care (LTC) insurance to remain independent post-RDR.
Under current rules, anyone wishing to advise on long term care (LTC) insurance policies must have passed an appropriate examination.
However, unlike pension transfer advice, advisers in the LTC market do not need to be granted specific permission by the FSA to carry out the activity.
With LTC insurance classed as a retail investment product, the PFS is concerned about the impact of RDR.
Fay Goddard, chief executive of the PFS, said: "My question to the FSA is that, if it [LTC insurance] is an investment product that falls under adviser charging rules, are you saying to be independent everyone has to do the qualification?
"Or is it like pensions transfers, where you need a special permission and qualification?"
Last year, following consultation with the FSA, the PFS published a guide to the requirements advisers need to meet to stay independent post-RDR.
However, with many questions still unanswered, Goddard confirmed the organisation is working on a follow-up to the guide and has been in further conversations with the FSA over the past few months.
She added: "We've flushed out key areas where we want more guidance, including the use of centralised investment propositions, which is dependent on an ongoing FSA review into the area."
"The other area is specialist referrals and specialisms within firms. I'm still not comfortable we've got clarity on that and the position they were taking. I think it would be detrimental to consumers."
Under its interpretations of the rules, firms specialising in certain areas of advice would run the risk of falling under the restricted banner.
For example, a firm focusing its business on investment advice, with no advice on life products or personal pensions, would not be permitted to call itself independent.
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Dont understand
I dont know much about LTC but if it is a retail investment product then surely an adviser has to acheive QCF L4 to advise on them - whether they are independent or not is irrelevant as the qualification rules apply to restricted advisers too.
Posted by: Andy
LTC Clarification
Andy - I think the point that Fay is making is that currently, even though you do not require any additional FSA Permissions to advise on LTC, you must hold CF8 or equivalent. Therefore, if LTC products are classed as a Retail Investment Product, given that Level 4 Diploma doesn't replace CF8, anyone holding themselves out to be Independent post RDR would have to hold CF8. This seems to have been overlooked to date. I too would also welcome further clarification on the effect of having 'Specialists' in a business on the ability to be Independent because my interpretation of the rules as they stand is that if a 'Specialist' is unable to advise across the board on all RIP's, the firm would be forced to become Restricted. Again, a point that seems to have been overlooked by many.
Posted by: Regulatory Jewels
How much more clarification??
The FSA has been saying for some considerable time that if you do not advise on areas that require special permissions or qualifications this will not compromise your independence. Pension transfers and LTC have always clearly been in this category. It has always been the case that independence is determined at firm level and client recommendation level (but not at individual adviser level) - in practice this means that if a client receives holistic recommmendations that have been prepared by, say, a pensions specialist and an investment specialist, then the advice (obviously subject to the other usual criteria) will still be independent. If on the other hand the specialist only considers the client with respect to their own field and considers no other options then this is restricted advice.
Posted by: Gillian Cardy
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I agree with the sentiment expressed. There are varied ways of managing LTC advice, yet they can fall into different regulatory categories which doesn't help providing help to those that need it.....
Posted by: Phil Veale