Financial advice is an area of growing concern to the public, and a recent survey indicates that over half of consumers believe the financial advice industry needs to be regulated by an independent regulator. The financial advice industry is diverse in format, services and providers and it is necessary to define a common professional standard that is relevant and effective in delivering quality advice.
What is this standard about?
BS 8577 sets out a framework for managing financial advisors and effectively supporting the provision of financial advice and planning services.
Who is this standard for?
- Financial advisors (IFA Industry)
- Financial planners – personal, corporate or business
- High street banks
- Senior management and financial directors
The current Financial Advice Market
The Standard recognises that there are a number of professional bodies that offer a set of standards for financial advice practitioners in the UK. It is however the view of the British Standards Institute that there is room for a single standard that provides the framework for the provision of financial advice and planning services and that is recognised by, and can be used in conjunction with the IAs professional standards. Having BS 8577 in combination with the relevant professional standards will provide a transparent channel for financial advice and planning services and will allow genuine high quality advice and guidance to be used to the benefit of the UK consumer.
The financial advice market is comparatively unregulated and provides consumers with little or no vetting of the expertise or financial standing of the provider. In recent times there have been a number of high profile cases involving the mis-selling of unsuitable investments to consumers. The British Standards Institute is responding to the increased demand by the public for independent regulation of the Financial advice sector.
What is a “planner”, and what is a “financial advisor”?
This Standard recognises both careers as valid and distinct options for qualified financial advisers (i.e. not all planners need to be licensed or registered as advisors, so planners may not always be financial advisors by definition, but a financial advisor must always be a planner). Where the terms planner and advisor are used in the Standard, it is in the context of the general standard practice of the financial advice profession, and not in relationship to a specific license or registration requirement. It should be noted that BS 8577 only applies to those individuals who are licensed or registered under the Money Lending Act. The Financial Conduct Authority is currently reviewing the situations of individuals providing Financial Advice in the UK.
Why should you use this standard?
Adviser firms and banks are a key channel for distributing financial services and products to consumers, including private and corporate clients. BS 8577 provides a framework that will enable them to meet the increasing levels of professionalism and management practice required of financial advice businesses.
The standard gives clear and up-to-date recommendations and incorporates all aspects that support the provision of advice services, outlining core competencies required from companies, their advisers and planners to ensure a fair, transparent and professional interaction with clients.
What does the BS 8577:2012 Standard offer?
The BS 8577:2012 Standard is designed to function in harmony with the IAs professional standards by offering companies a level playing field to work with, and also define clear standards of practice and career development for financial advisers and planners. It is a creative and fair standard that will help to ensure the provision of high quality advice services.
The Standard covers financial advice generally (including but not limited to) and the full range financial services.
In its first release, the standard has been launched in conjunction with the Institute of Financial Planning and the Association of Professional Financial Advisers.
The standard will assist companies with the following:
- To support the performance of their advisers and planners by defining competencies and overseeing their professional development
- To provide professional cleanliness in operation and design
- To offer a career development path for individuals in the financial advice industry that rewards professional excellence.
Why do you need the BS 8577:2012 Standard?
There is a real need to define standards allowing a clear understanding of the function of financial advice and planning services that are based on professional standards in the financial advice market.
This Standard will define the core competencies and oversee professional performance and the development of career paths for financial advisers and planners and will directly support individual consumers and the economy as a whole, while stimulating the development of the fairest practices for the industry.
- Developed industry-leading definition of financial advice and planning services
- Greater profession standards for the financial advice industry
- Professional governance and career development for financial advisers and planners
- Standardised levels of competency across the industry
- Specific career development of a profession that is critical to the economy and individual consumers.
- To clarify the provision of financial advice and planning services and to keep it clear, transparent and fair to the individual consumer
- To provide a clear career management path to professional excellence for financial advisers and planners
- To set out the core competencies required and oversee professional performance
- To set out the key working practice elements necessary for the effective deployment, operation and management of financial advisers and planners.
Is the professionals career development at risk?
This Standard is flexible and relaxed enough to embrace the existing range of career development options for financial advisers and planners. Some individuals may already have a career structure in place, while others may have established proven methods of development and progression. BS 8577 seeks to acknowledge and embrace all such existing systems. However, BS 8577 does not claim to invent new career structures for the industry; that is not its function.