The Level 5 Certificate in Financial Services is now a mandatory requirement of being an insurance adviser, but experts say it’s not just a formal qualification - it can also be a crucial roadmap in navigating the “non-prescriptive” approach of the new regime, particularly in areas like advice suitability, client understanding, and disclosure of relevant information.
Strategi executive director David Greenslade said that when it comes to the Code of Conduct, the Level 5 Certificate gives advisers some solid guidance on the minimum they need to do in various areas of client care. He said the skills advisers pick up during their Level 5 study should absolutely be carried over into their day-to-day routine as brokers, as it can help define how they should be presenting information and advice to clients in order to get a tick from the regulators.
“The Level 5 is not just purely a theoretical qualification, it’s really about the practical implementation of regulated financial advice,” Greenslade said.
“Although it is an academic qualification, it’s special in that it sets the standard of what a good client file looks like, or what a suitable advice document looks like.”
“Within that qualification, there is some very well-defined assessment criteria that our Strategi assessors need to use to work out if someone has passed a particular assignment or not,” he explained.
“It’s that criteria that advisers and FAPs should be meeting on a day to day basis, because the Code of Conduct says that that’s the minimum standard you should be operating at.”
Commenting on ‘suitable advice’ and what that means, Anthony Harper partner and insurance expert Nick Summerfield said that it is ultimately about offering a complete and balanced picture of each product. With advisers now obligated to take ‘reasonable steps’ to ensure a client has understood the advice given, he said the old method of putting together a 50-page file is also not going to cut it.
“In terms of suitability, it’s really about providing a total picture - both good and bad - as part of your advice process, and particularly if you’re providing some replacement of business,” Summerfield said.
“That’s really where you see problems arise if a balanced picture hasn’t been provided.”
“Taking reasonable steps to ensure client understanding isn’t about giving them a big file and saying ‘I’ve done that, because I’ve given them everything.’ Regurgitating information is definitely not the answer in that respect, and less is really going to be more,” he continued.
“It will of course depend a lot on who your client is, and whether you’re giving a simple piece of advice or a full financial plan. But talking to your client about whether they understand the advice you’ve given and asking whether they have any questions is clearly the best way of testing that.”
“The tick box does serve a purpose too, though that’s largely more for record keeping rather than a backstop,” he added.
“There’s no use getting a client to tick something to say they’ve understood it if they haven’t - that might not give you any protection at all if a problem arises.”
David Greenslade noted that for insurance advisers, this does not necessarily mean that they need to go into the fine details of every policy - however, they need to ensure that their client is aware of the risks, and of any potential disadvantages if they are replacing a currently held policy.
“You don’t want to get into all of the nitty gritty detail, because for that small detail fine print, you can refer the client to a link with all the relevant information,” Greenslade said.
“It’s the important, high-level things that you need to address - if you’re moving from one insurance policy to another, are there going to be stand-down periods? What is the waiting period? Are you giving up some other benefit that you might previously have had by moving across to the new product? Does this new policy exclude something along the way, or only pay a certain amount?
“In many cases it might not pay out at all, depending on the employment circumstances of the individual. But it’s about putting those things at a high level and talking about the key risks and disadvantages, as opposed to things down at the micro level.”