Pure protection sales to be supported by increased accreditation

Wednesday, June 30, 2010

The FSA has just published a feedback statement in response to calls for pure protection sales to be subject to enhanced accreditation schemes. The statement forms part of the FSA’s overall paper focusing upon professionalism and the Retail Distribution Review. The FSA published a consultation paper on RDR last year, requesting people’s views on whether there was a need for more professional standards when advisers undertook the sale of pure protection.

The FSA’s request resulted in 53 respondents, made up of professional bodies, trade bodies, providers and intermediaries. Most people who responded called for increased regulation in the form of enhanced certification processes.

Having reviewed the requests, and the professional accreditation available, the FSA have decided upon QCF level 3 as the most appropriate qualification to guarantee quality in pure protection sales. This level is considered to be the right level of accreditation for protection advisers, even though some industry critics have called for advisers to attain QCF level 4, to put them on a par with retail investment advisers.

At the moment, people who sell pure protection do not have to satisfy any academic requirements, even though they have to follow a number of strict guidelines provided by the FSA. Only those advisers who sell within the remit of the Conduct of Business Sourcebook are requested to sit an exam which covers pure protection policies.

The FSA statement says: “The complexity of protection products means that the provision of high quality explanations by firms to consumers buying these products is particularly important. Taking into account the feedback received, we will consider further the possible costs and benefits of introducing professional requirements for those selling pure protection, as a way of improving the quality of sales in general and explanations in particular. We will also examine other regulatory options to achieve the desired improvement in the quality of pure protection sales.”